Converting a Close Corporation (CC) to a Private Company

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

1. Agreement of Members: All members must agree to convert (often via a special resolution).
2. Name Reservation: If you’re changing the entity’s name, reserve a new company name.
3. Draft the MOI: Prepare a Memorandum of Incorporation suitable for the new company.
4. Statement of Solvency: The CC must declare it is not insolvent or under liquidation.
5. 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)
6. Pay the Fee: Remit the required CIPC fees.
7. 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.