An idiot’s guide to converting your close corporation to a company


companies act

For those of us who still think Trevor Manuel is the Minister of Finance and Clive Barker is the Bafana Bafana coach, take note of the changes governing the registration of businesses.

In terms of the New Companies Act of 2008, no new Close Corporations may be registered, and existing Close Corporations may convert to a company.

The Close Corporations Act has been substantially and materially amended in terms of Schedule 3 of the New Companies Act, resulting in new responsibilities and risks for the Close Corporation, its members and the accounting officer.

Noteworthy, most Close Corporations don’t have an Association Agreement (the equivalent of a company’s shareholders’ agreement or Memorandum of Incorporation – MOI). For this reason, if you plan to retain your close Corporation (and not to convert to a company) it is a very good idea to conclude an Association agreement, one that:

  • Is in the best interests of the Close Corporation and its members;
  • Is fully compliant with the amended Close Corporations Act;
  • Enhances the role, relationship, and responsibilities of members;
  • Covers accountability and other requirements of the act;
  • Ensures that members enjoy the Business Judgment Rule protection (;
  • Identifies all cases requiring solvency and liquidity tests;
  • Forewarns members of sanctions applicable to reckless or fraudulent business activities in the Corporation.

 Unlike the company’s MOI, the Association agreement does not have to be registered or submitted to CIPC. Certainly, being informed is being empowered! Be familiar with the requisite paperwork, as a would-be entrepreneur!


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