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A Close Corporation (“CC”) is the ideal vehicle for many small and start-up businesses that want to function as a legal entity, while limiting legal and administrative requirements (and costs) to the minimum.
A CC is limited to 12 members and all members will have an interest and make contributions to the business.
It is often more desirable to register intellectual property items in the name of a legal entity, than in the name of an individual for a number of reasons. However, it is also possible to register intellectual property in the names of individuals. If it is preferred that intellectual property, such as trade marks and patents, be registered in the name of a new legal entity, a CC is a good option, as it is fairly simple, quick and not very expensive to form and register.
Name reservation procedure:
The first step in registering a Close Corporation is a name reservation. A list of 6 names in order of preference and a description of the principal business are required for this action.
Under normal circumstances, a reply to a request for a name to be reserved on the Close Corporation Register can be expected within a few working days. Successful name reservations are valid for 2 months from the reservation.
Additional steps to take:
Before or as soon as the Registrar advises that the name reservation is approved, this is a good time to consider and attend to the following:
(a) A possible trade mark search and/or application: As there is no cross referencing between the Companies Register and the Trade Mark Register, it is possible that a CC name may be approved and the CC registered, even though the chosen CC name is not available for use and/or registration as a trade mark. We therefore strongly suggest that, once a close corporation name is approved, client further consider trade mark searches and registrations in the territories where they will be trading and using the business name in a trade mark manner.
(b) Name reservation for shortened form and/or translated name: If you wish to register a shortened form or literal translation of the CC name, separate name reservations will also have to be done for these names. When such name reservations are approved, trade mark searches and/or applications for the shortened form and/or translated name should also be considered, if applicable.
(c) Obtain a letter from Accountant: The CC registration cannot be completed without lodging an original, signed letter from an accounting officer, on their letterhead, confirming their appointment. If you have not yet appointed an accounting officer, we could obtain a letter from our own accountant to avoid delays. You could later always decide to appoint your own accountant.
Registration procedure:
After a close corporation name is reserved, the next step in the registration process is to complete the official Form CK1 to arrange for the actual registration of the close corporation. To enable us to attend to the registration, we will require the following information to complete the CC Founding Statement:
(a) Full names and surnames of member/s
(b) Physical and postal addresses of member/s
(c) Size of interest of each member expressed as a percentage
(d) Nature of contribution of members and monetary value thereof (if applicable)
(e) Physical and postal address of business
(f) Name and contact details of Accountant
(g) The id (identification document) numbers of the member/s
South African citizens who will be members of a new CC, no longer need to provide copies of their ID documents for lodging. Where a person who is not a South African citizen wants to be a member of a close corporation in South Africa, a written statement (sworn to and signed before a Commissioner of Oaths) to this effect has to be submitted together with the CC registration documents.
In this regard, we will prepare and forward written statements that must be signed before a Commissioner of Oaths. The original, signed written statement must then be returned to us by either hand or mail, as the Registrar will not accept faxed/e-mailed copies. Furthermore, a certified copy of the relevant passport must be attached to the Written Statement.
Association agreements:
Although it is not compulsory for members of a CC to have a written Association Agreement, entering into such an agreement is advisable where there is more than one member.
Association agreements typically provide for aspects such as the contribution, interest, job description and remuneration of each member, restraints of trade, and what happens in the event of death of a member etc.
Making the members’ understanding clear at the beginning of a new business goes a long way to preventing misunderstandings and disputes amongst members that could lead to failure of even the most promising business venture.
Need further advice or information?
Please note that the above comments are general information. Please do not hesitate to contact us, if you require formal advice, recommendations and cost estimates for a close corporation registration or a trade mark search or application.
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