CLOSE CORPORATIONS: TO CONVERT OR NOT? THAT IS THE QUESTION Now that the new Companies Act has been signed into law, should you rush to convert your company to a close corporation (or vice versa)? Note firstly that, until the new Act actually comes into force next year (10 April 2010 at the earliest), you can continue to register new CCs, and to convert between CCs and companies. Moreover, existing CCs will continue as such even after the new Act kicks in. The close corporation has been widely favoured as a simpler and cheaper alternative to the company (audit costs being a particular negative for many smaller companies), and hopefully the new Act will not only retain these advantages for existing CCs, but also extend them to smaller private companies, by exempting them from their existing audit requirements. There is no certainty in this regard yet - regulations are still to be made regarding the exact circumstances in which audit will be required. But it seems likely that there will be no audit requirement if your business doesn't fall into a category that renders it "desirable in the public interest" for it to be audited. Hopefully most smaller companies will fall outside that net, in which event their financials will need only to be subjected to "independent review" - likely to cost a lot less than a full audit. In a nutshell, the new laws don't force any change on you - the decision of which route to take must be a commercial and practical one taking account of your particular circumstances. Take advice in doubt - but until there is clarity on exactly how the new auditing and reviewing provisions will be formulated, there is probably no need to rush around changing entities. Recent Articles for September 2009; Source: www.dotnews.co.za |
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