Why Convert?
- Limited Liability and Growth: Private companies offer clearer governance structures and easier access to financing.
- Future‑proofing: Close corporations are a legacy structure; the Companies Act 2008 no longer allows new CCs.
- Succession Planning: Shares in a company are easier to transfer than members’ interests in a CC.
Conversion Process
- Agreement of Members: All members must agree to convert (often via a special resolution).
- Name Reservation: If you’re changing the entity’s name, reserve a new company name.
- Draft the MOI: Prepare a Memorandum of Incorporation suitable for the new company.
- Statement of Solvency: The CC must declare it is not insolvent or under liquidation.
- Submit Forms to CIPC:
- CoR 18.1 (Application to convert a CC)
- CoR 15.1A or 15.1B (MOI)
- CoR 9.1/9.4 (Name reservation)
- CoR 39 (Change directors)
- Pay the Fee: Remit the required CIPC fees.
- Post‑Conversion Compliance: Once the conversion is approved:
- Issue share certificates to former members.
- Hold an inaugural directors’ meeting.
- Update records with SARS, banks, B-BBEE, and any other relevant registrations.
Key Tips
- Legal Advice: Consult legal and accounting professionals to ensure all liabilities and tax implications are handled correctly.
- Communication: Inform clients, suppliers and banks about the change.
- Timing: Conversions can take several weeks, depending on documentation and CIPC processing.
