2.3 CLOSE CORPORATIONS
The Close Corporations (cc) has its own Act that governs all aspects of the way a cc runs. The cc gives the owners of the cc certain protection in case of insolvency. The cc came about in 1984 because the Companies Act at that point was clearly designed for larger businesses. As part of the government reform process the cc was instituted to cater for smaller businesses, nevertheless there are some very large cc's. The cc has been incredibly successful in that they outnumbered companies by 8 to 1 before the new act was implemented. There were less formalities in a cc seeing that one does not have to perform an audit and comply with all the requirements of companies.
It is definitely government’s intention to move the more than 1 million cc’s into the company environment as soon as it becomes feasible from a CIPC point of view. They have indicated a period of ten years which has now passed. I believe this should only happen when the CIPC gets its house in order.
It is probably best in today’s strenuous tough business environment for all businesses once a start-up takes off and risk is introduced for the business to become a company. The new Companies Act prohibits new close corporations from being formed but allows cc’s already in existence to remain forever at this point.