You cannot register a new close corporation. New CC registrations closed when the Companies Act 71 of 2008 came into effect on 1 May 2011. Existing close corporations may continue to operate indefinitely under the Close Corporations Act, and they still have to file annual returns with CIPC and can still be deregistered for not doing so. A CC can convert to a company, but a company can never convert to a CC — the door only opens one way.
If you own a CC, the practical question is not whether you can keep it. It is whether the reasons to convert now outweigh the reasons to leave it alone.
What a close corporation is
A CC is a legal entity created under the Close Corporations Act 69 of 1984, designed as a simpler alternative to a company for small owner-run businesses.
The differences from a (Pty) Ltd:
| Close corporation | Private company | |
|---|---|---|
| Owners called | Members | Shareholders |
| Ownership expressed as | A percentage interest | Shares |
| Maximum owners | 10 | No limit |
| Who can be an owner | Natural persons only, with limited exceptions | Anyone — people, companies, trusts |
| Management | Members manage directly | Directors, who need not be shareholders |
| Founding document | Founding statement | Memorandum of Incorporation |
| Financial oversight | Accounting officer | Audit or independent review, based on public interest score |
| Can new ones be registered? | No | Yes |
Members are the owners and the managers. There is no separation between the two, which is exactly what made a CC attractive to a one or two-person business — and exactly what makes it unsuitable once you want outside investment.
What still applies to your existing CC
This is where owners get caught, because "the CC is an old structure" gets misread as "the CC has no obligations".
Annual returns are still due to CIPC, every year, in the anniversary month. A CC that does not file them is referred for deregistration exactly like a company. See what is your company's anniversary date.
Beneficial ownership filing applies, and an unfiled register blocks the annual return. See what happens if you don't file beneficial ownership.
Tax obligations are identical to a company's. A CC is taxed as a company — 27% on taxable income, or the Small Business Corporation rates if it qualifies. Provisional tax twice a year, an income tax return annually, and dividends tax on distributions to members.
An accounting officer must be appointed, and financial statements prepared.
Deregistration works the same way, with the same consequences — frozen bank account, contracts in doubt, assets capable of vesting in the state, and a reinstatement application to fix it. See how to reinstate a deregistered company.
A very large number of deregistered entities in South Africa are dormant CCs whose owners assumed that because they stopped trading, the obligations stopped too. They did not.
Converting a CC to a company
Conversion is permitted, and it is one-way. Members become shareholders, the member's interest converts to shares, and the entity continues as the same legal person with the same registration number.
Why the "same legal person" point matters: conversion is not a disposal. Assets do not transfer, contracts remain valid, tax numbers stay the same, and there is no capital gains event on the conversion itself. This is fundamentally different from moving a business into a new company. See how to move a business from a sole proprietor into a company.
Reasons to convert:
You want to bring in an investor. A CC cannot have a company or a trust as a member, which rules out most investment structures
You want more than 10 owners
You want to separate ownership from management — shareholders who do not manage, directors who do not own
You want a share incentive scheme for staff, which a member's interest does not support
A customer, funder or tender requires a company, which does occasionally happen
You want the flexibility of a custom MOI for deadlock provisions, share classes and pre-emptive rights. See what is an MOI and do you need a custom one
You are planning to sell. Buyers are more comfortable with shares than with member's interests, and the diligence is more familiar
Reasons not to convert:
Nothing is changing. A single-member CC trading quietly has no structural problem to solve, and conversion costs time and money for no benefit
The obligations are broadly similar either way — annual returns, beneficial ownership, tax, financial statements
It is irreversible. Once converted, you cannot go back
The honest default is to leave it alone until there is a reason. Conversion is a solution to a specific problem — investment, ownership structure, sale — and not an upgrade for its own sake.
What to do before you convert
1. Bring CIPC up to date. Outstanding annual returns or beneficial ownership can block the conversion.
2. Bring SARS up to date, and confirm who the registered representative is. See what is a SARS registered representative.
3. Decide the share structure. How many shares, what classes, held by whom. Converting a 60/40 member's interest into a share register is the moment to think about whether that split is still right.
4. Decide on a custom MOI. This is the cheapest moment to adopt one, and if there is more than one owner it is worth doing properly.
5. Take tax advice where the member's interests are unequal or where there is any accompanying restructure. The conversion itself is not a disposal, but anything you do alongside it might be.
6. Plan the downstream updates — bank, CSD, COIDA, CIDB, industry registrations, contracts, insurance. The registration number does not change, which helps, but the entity type on every record does.
Frequently asked questions
Can you still register a close corporation in South Africa? No. New close corporation registrations closed when the Companies Act 71 of 2008 came into effect on 1 May 2011. Existing CCs may continue to operate indefinitely under the Close Corporations Act.
Do close corporations still have to file annual returns? Yes. A CC files annual returns with CIPC every year in its anniversary month, and is referred for deregistration if it does not — with the same consequences as a company, including a frozen bank account and assets capable of vesting in the state.
How is a close corporation taxed? As a company. Corporate income tax applies, or the Small Business Corporation rates if the CC qualifies, with provisional tax twice a year, an annual income tax return, and dividends tax on distributions to members.
Can a close corporation be converted to a company? Yes. Members become shareholders and the member's interest converts to shares, with the entity continuing as the same legal person and the same registration number. It is not a disposal, so assets do not transfer and contracts remain valid.
Can a company be converted into a close corporation? No. Conversion only works one way. Once a CC becomes a company, it cannot revert.
Can a company or trust be a member of a close corporation? Generally no. Members must be natural persons, with limited exceptions, which is the main reason a CC cannot accommodate most investment structures.
How many members can a close corporation have? A maximum of 10.
Should I convert my CC to a Pty Ltd? Only if there is a reason — bringing in an investor, needing more than 10 owners, separating ownership from management, a share incentive scheme, or preparing for a sale. A single-member CC trading quietly has no structural problem that conversion solves.
Leave it alone, or convert deliberately
The CC is not a problem to be fixed. It becomes one only when you want to do something it structurally cannot do — take investment, exceed 10 owners, or issue shares to staff.
Smartbook files annual returns and beneficial ownership for close corporations, and handles conversions to a (Pty) Ltd with the MOI and share structure set up properly at the same time.
Sort out your CIPC annual returns →
Last reviewed: 29 July 2026. Written by the Smartbook team — SAIPA and SAICA accredited, SARS registered tax practitioners. Conversion from a close corporation to a company has legal and tax implications that depend on the specific facts — take advice before converting. CIPC processes change from time to time; confirm current requirements at cipc.co.za. General guidance, not legal advice.
Primary sources: Close Corporations Act 69 of 1984 · Companies Act 71 of 2008 · CIPC · SARS