A close corporation is like a company, only less expensive and less complicated to run. Since May 2011 no new CC’s were allowed to be created and the conversion from company to CC is also not allowed.

A CC is more expensive to run than a partnership or sole trader because you need to pay an ‘accounting officer’ to do the books of the business. You also have to keep records for the CC and each member has to keep records for tax purposes.

The people who own and manage the close corporation are called members. There are no directors or shareholders or a chairperson of the board, like a company has. A close corporation cannot have more than 10 members.

The law sees a close corporation as separate from its members. This means that unlike a sole trader and a partnership, the assets and debts of the business belong to the close corporation, and the assets and debts of the members have nothing to do with the CC.

For example, Cool Leathers CC buys leather from a supplier to repair shoes. The CC does not pay the supplier for six months. The supplier decides to go to court to get his money from the CC. If Cool Leathers does not have the money to pay the supplier, the court can only take the things that belong to the business, Cool Leathers, to pay the debt. The court cannot take the private things that belong to Vusi and Linda, who are members of Cool Leathers.

Financial reporting has now been made the same as that of a company. A CC may be subject to an independent audit or accounting officer’s report. The criteria will be the same as that of a company.

If the business is a CC and the CC has a letterhead, the registration number of the CC and all the names of the members must be printed at the bottom of the letterhead.

SIGNING SURETY

Suppliers may be scared that a CC has no money to pay. Suppliers therefore often make sure that somebody signs surety for the CC, which means that if the CC does not have the money to pay, the person who has signed the surety will have to pay (be liable for) the debt.

Members of a close corporation must always write CC behind the name of the close corporation, for example Cool Leathers CC. If members do not put CC behind the name whenever they write it, then the law does not see the CC as separate from its members and the debts and assets of the CC are not separate from the debts and assets of the members.

If the business is a CC and the business has a letterhead, the registration number of the CC and the full names of the members must be printed on the letterhead. The number will look something like this: CK2008/031666/23.

If the business has an office, then the owner must have a sign showing the business is a CC. For example, if Anna has a dry cleaning business, then she must have a sign saying ‘ANNA’S DRY-CLEANING SERVICES CC’.