Close Corporation Act

Question 1

What are some advantages of cc?

Answer 1

1. Easy decision making
2. Managed by owners
3. Less regulation
4. No audit (depend on PI score)
5. Member or employee can act as accounting officer
6. No transfer fee is member change
7. Corporation may assist member to purchase interest or buy back interest

Question 2

What are some disadvantages of cc?

Answer 2

1. Members can become personal liable
2. Each member can bind the corporation
3. Membership restriction
   
   • limited to 10
4. Interest paid on money borrowed to buy interest in cc not deductible

Question 3

Discuss the formation of a cc

Answer 3

1 to 10 members can form a cc and incorporated by registration of the founding statement - until 1 May 2011
CC is considered to be a juristic person therefore members are not liable merely by reason of membership for liabilities and obligations of the cc

Question 4

Discuss the registration of a cc

Answer 4

Name can be reserved for max 2 months

Contributions by members should be specify in the founding statement

Question 5

Discuss membership of cc

Answer 5

Min 1 max 10 members
Has to be a natural person
Members interest are expressed as a % and its not joint holding
Certificate of members interest signed by all memebers

Question 6

Discuss the change in membership of a cc

Answer 6

New membership acquired through:
- one or more existing members
- deceased or insolvent estate
- contribution to cc
New members interest determined:
- by agreement with other members
- other members interest decreased (total = 100%)

Question 7

Discuss the financial assistance by cc to buy interest

Answer 7

Requires written consent of all members and satisfy the liquidity and solvency test after financial assistance given

Question 8

What are the fiduciary position of members?

Answer 8

1. Act honestly and in good faith
2. Exercise power to benefit corporation
3. Not exceed powers
4. Avoid conflict of interest
   
   • declare early