It is no longer possible to register a new close corporation or CC. However, you can carry on trading under a CC that existed before 1 May 2011. But CC’s will slowly become extinct and every CC will (at some point) have to be converted into a private company ‘(Pty Ltd)’. The Pty Ltd vs CC debate is not a simple one.
Pty Ltd vs CC – Which one is Best?
Many people chose a CC and still prefer a CC because a CC gave them the advantages of incorporation, with lower costs and simpler administration. Virtually all the advantages that a CC had, can now also be obtained by having a private company under the new Companies Act. For example:
- the annual return fee is the same regardless of whether you have a CC or a company
- small private companies do not need to be audited or produce audited financial statements
- small private companies do not need to convene an annual general meeting (AGM)
The advantages of being a private company
Some argue that there are actually more advantages to being a private company rather than a CC:
- Compete with bigger companies in the same market.
- Invite other parties to invest as shareholders in your business.
- Raise more capital to grow your company.
- Enable companies and CCs to be shareholders in your business.
- Benefit by being regulated by a law (the new Companies Act) that is up-to-date with international best practice.
- Administer your company electronically.
- Ensure that the rights, duties and responsibilities of members are clearly set out.
- Avoid disputes between members.