Close Corporations targeted in Companies Bill

However, the state is targeting the misuse of the close corporation system by establishing a new system that will allow business to flourish, says a report in Business Report. Nikki Viljoen, of N Viljoen Consultants, is quoted as saying the problem with close corporations is that they are not required to be audited and there is no certainty their accounts are adequately managed. Many close corporations had been used in the past by the property industry to avoid transfer tax on properties. Trade and Industry Minister Mandisi Mpahlwa is piloting through Parliament a Companies Bill which, when enacted, will see the end of new close corporation incorporations. However, it is envisaged that existing close corporations will be allowed to continue to operate for 10 years. The legal advantages of close corporations have recently begun to ebb, however. In January, notes the report, the Cape High Court ruled that members and officers of a close corporation could be held liable for a corporation's debts. Until then, close corporations could be set up to ensure that members were not liable for the corporation's debts. Full report in Business Report

PwC's technical head, Adrian Dadd, agrees. In a Sake24 report he points out that role-players will have to discuss the costs involved in converting CCs into private companies. Members of CCs may decide when it is appropriate to convert their businesses to companies, says Dadd, who estimates the amended legislation will be implemented in about two years. 'The amendments are far-reaching and role-players should begin preparing for a changed regulatory environment,' he says. Full report on the Sake24 site