SU 1: Close Corporations, Membership and Members interest
Close Corporation ("CC") as a Business Venture
Background Close Corporation (CC) :
A business entity with a
Old Companies Act 61 of 1973 separate legal personality , designed to provide
>
- Had complex rules and regulations a simpler and more flexible form of business
>
- made it difficult to establish small businesses structure
↓
·
CloseCorporations Act 69 of 1984
-created the close Corporation (CC)
-
Provided a simpler business entity
similar to a in
company many ways
-
CCS today
New CCS can be registered
langer
·
no
The Companies Act 71 of 2008 provides the alternative
Existing CCs continue indefinitely until they are converted into companies
·
may
Characteristics of a close Corporation
>
-
Separate legal personality Natural person : A human being /legal person
·
The CC is
legally separate from its members Juristic person : An
entity recognised by law as
↳ The CC is treated as its own
legal person having its own
legal personality
and can own property , enter into contracts
and incurdebts Separately from its members
>
- unlimited capacity
A CC has unlimited legal capacity
·
Easy
>
solvency and liquidity
-
>
- and inexpensive to form
-
Simpler legal formalities Applied when the CC makes distribution
-less than traditional structures of profits
costly company
>
- members Solvency Ability to pay debts
: when they
·
max 10 members become due
members must generally be natural persons
CCs do not have shareholders Liquidity Having enough cash/assets that
:
·
Juristic persons cannot ordinarily be members can be converted into cash to meet
short-term obligations
, Protecting of ThirdParties
Third parties >
- people/businesses dealing with <C
·
>e
-
g . creditors / suppliers
members' personal liability
·
members may be personally liable if they fail to comply prescribed requirements
=
with when
entering into
contractors with third parties
·
Flexible structure
-
CCs have a flexible structure
Can be specific needs/members
-
adapted to the
Legal Rules
·
Rules
regulating relationships between
-
·
(C es members
·
membersf members
/memberss third parties
are provided by the CC Act
Accounting records
·
CCS must keep accounting records
-
: -
Do not have to be audited
-
officer
-
must appoint an accounting
Relevance of CCs under the companies act 2008
Existing CCS
·
> can
- continue to exist indefinitely
They can continue until they are converted into companies
Close Corporation ("CC") as a Business Venture
Background Close Corporation (CC) :
A business entity with a
Old Companies Act 61 of 1973 separate legal personality , designed to provide
>
- Had complex rules and regulations a simpler and more flexible form of business
>
- made it difficult to establish small businesses structure
↓
·
CloseCorporations Act 69 of 1984
-created the close Corporation (CC)
-
Provided a simpler business entity
similar to a in
company many ways
-
CCS today
New CCS can be registered
langer
·
no
The Companies Act 71 of 2008 provides the alternative
Existing CCs continue indefinitely until they are converted into companies
·
may
Characteristics of a close Corporation
>
-
Separate legal personality Natural person : A human being /legal person
·
The CC is
legally separate from its members Juristic person : An
entity recognised by law as
↳ The CC is treated as its own
legal person having its own
legal personality
and can own property , enter into contracts
and incurdebts Separately from its members
>
- unlimited capacity
A CC has unlimited legal capacity
·
Easy
>
solvency and liquidity
-
>
- and inexpensive to form
-
Simpler legal formalities Applied when the CC makes distribution
-less than traditional structures of profits
costly company
>
- members Solvency Ability to pay debts
: when they
·
max 10 members become due
members must generally be natural persons
CCs do not have shareholders Liquidity Having enough cash/assets that
:
·
Juristic persons cannot ordinarily be members can be converted into cash to meet
short-term obligations
, Protecting of ThirdParties
Third parties >
- people/businesses dealing with <C
·
>e
-
g . creditors / suppliers
members' personal liability
·
members may be personally liable if they fail to comply prescribed requirements
=
with when
entering into
contractors with third parties
·
Flexible structure
-
CCs have a flexible structure
Can be specific needs/members
-
adapted to the
Legal Rules
·
Rules
regulating relationships between
-
·
(C es members
·
membersf members
/memberss third parties
are provided by the CC Act
Accounting records
·
CCS must keep accounting records
-
: -
Do not have to be audited
-
officer
-
must appoint an accounting
Relevance of CCs under the companies act 2008
Existing CCS
·
> can
- continue to exist indefinitely
They can continue until they are converted into companies
