Topic 4 T2 (close corportions)

Question 1

What is a Close Corporations

Answer 1

• registered
• 1-10 people
• Created for Smaller businesses
• exist under the CC act

Question 2

What are the characteristics of Close Corporations

Answer 2

• 1-10
• name must end in a cc
• legal entities
• continuity
• everything belongs to the cc
• if the cc made det the owners may become responsible for it

Question 3

What are the advantages of Close Corporations

Answer 3

• have limited liability for dets
• appropriate for small and medium business
• greater access to capital
• FS not audited
• Bus tax rates lower than individual

Question 4

What are the disadvantages of Close Corporations

Answer 4

• Capital is limited to the contribution of up to ten members.
• Creditors will normally require members to stand surety before they lend money to the CC.
• All members of the CC must give their approval if a member wishes to sell his/her interest.
• The financial statements of some CC’s are subject to an independent review and/or an audit.

Question 5

The future of Close Corporations

Answer 5

• The new Companies Act (Act No. 71 of 2008) does not make provision for the formation of new Close Corporations.
• All existing Close Corporations may continue to exist indefinitely, or until their members decide to convert the CC into a company.
• Existing companies may not be converted into CC.
• Existing CC will be treated as private companies