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CHAPTER 30: INTRODUCTION TO CLOSE CORPORATIONS
(CC's):
CLOSE CORPORATION (CC) AS A BUSINESS VENTURE:
• The Old Act complicated business operations, making it challenging to establish small
corporations.
Example: Small businesses struggled to comply with extensive regulations under the
previous Companies Act.
• As a result, starting small corporations was difficult due to regulatory complexities and
requirements.
Example: Entrepreneurs faced hurdles in forming businesses because of stringent legal
requirements and documentation.
• The Corporations Act 69 of 1984 established the framework for close corporations in South
Africa.
Example: This Act allowed small businesses to register as close corporations, simplifying
their legal structure.
• This Act created a simpler entity similar to companies, easing administrative burdens for
businesses.
Example: Close corporations required fewer formalities compared to private companies,
promoting easier business management.
• However, new close corporations cannot be established; Companies Act 71 of 2008 prohibits it.
Example: Entrepreneurs must now register as private companies instead of forming new
close corporations.
• The Companies Act 71 of 2008 provides the necessary framework for new business entities.
Example: New businesses are now incorporated under the Companies Act, ensuring
compliance with modern regulations.
CHARACTERISTICS OF THE CC:
1. Separate legal personality-a company exists independently from its owners, holding distinct legal
rights and obligations and will enjoy perpetual successes.
Example: In Salomon v Salomon & Co Ltd, the company was treated as separate from Mr.
Salomon.
2. Capacity is unlimited-companies can engage in various activities and transactions without
restriction.
Example: A company can invest in real estate, conduct trade, or expand into new markets.
3. Formation of CC-close corporations are easier and cheaper to establish, requiring minimal legal
formalities.
Example: Registering a CC involves submitting a founding statement and paying a small
fee.
4. Membership limitations-a close corporation can have a maximum of 10 natural persons as
members.
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