Close Corporations, Liquidations and Partnerships. (NB- these will be tested thoroughly in final exam)
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9. Close Corporations
A CC is formed when a founding statement (CK1 form) is registered with the Registrar of Close
Corporations and a certificate of incorporation is issued. A registration number is allocated by
the Registrar to the CC at formation and the Registrar approves the following items:
Name of the CC
Registered address
Accounting officer, his occupation and address
Main business of the CC
% interest of each member
Descriptions of each of the member’s contributions
Names and addresses of the members
Financial year-end of the CC
After 1 May 2011 existing CC’s have the option to continue as a CC, or to convert into a
company.
Characteristics:
A CC is a separate legal person.
A CC continues to exist even if members change.
Members of a CC have limited liability (restricted to capital contributions).
A minimum of 1 and maximum of 10 natural persons can be members of a CC.
In terms of the CC Act, a CC can purchase a member’s interest or provide monetary assistance
to any person to obtain member’s interest
Members:
Members are restricted to the following:
natural persons or testamentary trusts
a trustee of a testamentary trust who is a natural person or legal entity, but who is not
a beneficiary of a trust and who does not control a beneficiary of a trust
a natural person or legal entity who acts on behalf of a member who is insolvent, has
died, is mentally disturbed or otherwise unqualified.
Every member has a fiduciary duty towards the corporation. The relationship between
members is regulated by the CC Act. Members should also enter into a written association
agreement in order to arrange the internal relations. The association agreement should
stipulate the following:
Duties of each member with regard to the management of the CC.
How disputes should be settled.
Remuneration of each member.
Distribution of profits to members.
How changes in members’ contributions should be treated.
Powers to enter into loan agreements, etc.
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