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Close Corporations are registered and regulated in terms of the Close Corporation Act, 1984 (Act 69 of 1984). The close corporation is a much more simplified legal form than the company and is specifically aimed at the small business. A close corporation can be formed with one or more members but at no stage may there be more than ten (10) members. See section 1 for the advantages and disadvantages of the close corporation:
For ease of reference this page is divided into the following sections:
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1. The concept of a close corporation The close corporation provides a simpler and less expensive corporate form for the single entrepreneur or few participants. The legal requirements under which the close corporation operates are basic and far simpler than the Companies Act. The following are some of the distinctive features of the close corporation:
The advantages of a close corporation are as follows:
The disadvantages of a close corporation are as follows:
2. Documents required for the incorporation of a close corporation For the incorporation of a close corporation the following documents have to be lodged:
All documents must be completed in black ink. Only one originally signed copy of form CK1 has to be lodged although it is advisable to lodge two forms CK1 and ask that one copy be stamped as proof of lodgement. The Registrar will retain the original copy of form CK1 and furnish the applicant with a certificate of incorporation when the close corporation is registered. Form CK1 is not returned to the applicant anymore. Form CK1 is now printed on white paper and not blue paper as before. The members of a close
corporation with two or more members may in addition enter into a written
association agreement regulating internal matters
of the close corporation not inconsistent with the provisions of the Act.
It must be signed by or on behalf of each member and must be kept at the
registered office where members may inspect it and make extracts from or copy
it. Click on the icon to see the section on association agreements.
The founding statement serves as the charter of the close corporation and sets out its corporate structure. It must be in one of the official languages of the Republic of South Africa and signed by or on behalf of every person who is to be a member of the close corporation upon its registration. It contains the following information:
3. The name of the close corporation The abbreviations CC and BK, in capital letters, or its equivalent in any other official language, must be added to the name used by the close corporation. The following is a list of the terms and abbreviations in all the official languages:
If a close corporation is being wound up, the statement "in liquidation" or "in voluntary liquidation", as the case may be, must for the duration of the proceedings be subjoined to the name used by the close corporation. The full registered name of the close corporation (or a registered literal translation thereof) and its registration number in a conspicuous position and in legible characters must be 1) displayed on the outside of its registered office and every office or other place in which its business is carried on, and 2) mentioned in all notices and other official publications of the close corporation and in all bills of exchange, promissory notes, endorsements, cheques and orders for money, goods or services purporting to be signed by or on behalf of the close corporation, and all letters, delivery notes, invoices, receipts and letters of credit of the close corporation. Failure to do so constitutes an offence. If a shortened form of the name of the close corporation was registered it can only be used in conjunction with the name of the close corporation or the literal translation of the name. If within one year after incorporation of a close corporation it appears to the Registrar that the name in the founding statement is undesirable, he must order the close corporation to change the name. An interested person may, within a period of one year after the registration of the founding statement and on payment of the prescribed fee of R500.00 revenue stamps, apply in writing to the Registrar for an order directing the close corporation to change its name on the ground of undesirability or because such name is calculated to cause damage to the applicant. An interested person may also, within a period of two years after registration, on the same grounds apply to a court for such an order, and the court may, on such application, make such order as it deems fit. A person feeling aggrieved by a decision or order by the Registrar as to a name may within one month thereafter apply to the High Court for relief, and the court may, after the consideration of the merits, make an order it deems fit. A close corporation may
change its name by firstly applying for the name on form CK7 and secondly by
lodging an amended founding statement. Click on the icon to see the section
on other changes in
respect of a close corporation.
Forms must be written in block capitals or be typewritten in legible characters in black ink and printed on white paper. The use of coloured paper for some of the forms was cancelled. It is advisable when forms are lodged that a stamped copy of the form be retained as proof of lodgement and for the close corporation's records. It is also advisable to make use of an agent for the lodgement of forms as the agent is in a better position to follow up on the registration of forms and to obtain a stamped copy for the close corporation's records. The following forms can be lodged with the Registrar of Close Corporations:
5. Membership in a close corporation A close corporation may be formed with one or more members but at no time may there be more than ten members. Members are not entitled to be joint holders of the same member's interest in the close corporation. Only natural persons who are entitled to a member's interest may be members of a close corporation. A trustee of a trust inter vivos may not be a member of a close corporation although a natural person who holds that membership for the benefit of a trust inter vivos if immediately before 13 April 1987 may continue to be a member of the close corporation subject to certain restrictions of Section 29(1)(A) of the Close Corporations Act (Act 69 of 1984). A juristic person is also excluded from becoming a member of a close corporation which means that no company or a close corporation may hold membership in a close corporation. A close corporation may however have an interest in a company. The following persons shall qualify for membership of a close corporation:
Minors and insolvent persons can be members of a close corporation but they will have to be represented or assisted by their guardians, legal representatives or trustees. A minor is a person under the age of 21. Consent is given on form CK1. The guardian, legal representative or trustee signs on behalf of or with the minor/insolvent person but the details of the minor/insolvent person are recorded. The guardian, legal representative or trustee should also indicate below his/her signature his/her full names and relationship to the minor/insolvent person. They are not allowed to take part in the management of the close corporation except for a few exceptions (Section 47 of the Act). A minor who has attained at least the age of 18 years and whose guardian has lodged with the close corporation a written consent to the minor's participation in the management of the business of the close corporation are allowed to take part in the management of the close corporation. A married woman, whether subject to the marital power of her husband or not, shall require no representation or assistance to act as a member of a close corporation. Membership in a close corporation commences on the date of the registration of the founding statement reflecting particulars of the membership. On the admission of a new member, an amended founding statement must be registered within 28 days. It must be signed by or on behalf of each member and by or on behalf of any person who will become a member of the close corporation. The new member's membership commences on the date of registration of the amended founding statement. Each member acquires a member's interest in the close corporation. Such an interest must be a single interest expressed as a percentage of the total and two or more persons may not be joint holders of the same member's interest. A member's interest does not necessarily have to correspond with the percentage which his contribution bears to the total contributions of all members. Each member must be issued with a certificate of member's interest, signed by or on behalf of every member, stating the current percentage of such member's interest in the close corporation. Send an e-mail to edelweiss@mweb.co.za for a free example of such a certificate. The aggregate of all members' interests in the close corporation expressed as a percentage must at all times be 100%. Therefore on the admission of a new member or the retirement of an existing member the percentage of the respective members' interests must be adjusted to retain an aggregate of 100%. A member may cease to be a member of a close corporation under one of the following circumstances:
6. Change of membership in a close corporation If a new member must be added or an existing member ceases to be a member or if the size of a member's interest or the particulars of the contribution of a member must be changed, an amended founding statement (form CK2) must be lodged within 28 days of such change. The detail of the remaining members and new members must be completed on page 2 of the form if there are less than four (4) members. If there are more than four (4) members page 3 must be used for the extra members. All the remaining and new members must sign at item 7. If someone else signs on behalf of a member, a power of attorney by such member authorising the person concerned to sign on his behalf must be attached to the amended founding statement. Persons who cease to be members must sign the last page of form CK2. Postal codes must be specified in the member's addresses. Identity numbers must be specified throughout. If a person does not have a South African identity number the date of birth must be specified and a letter signed by the person must be attached to the form stating the reason why no South African ID number has been issued. The aggregate of all the members' interests must at all times be 100%. No stamp duty is payable on the form if there is only a change in membership. The form must be completed in black ink only. The form must be printed on white paper and only one copy of the form must be lodged. It is recommended that two copies be lodged and that a stamped copy be retained as proof of lodgement. The change in membership will take effect when the form is registered by the Registrar. A certificate of amended founding statement will be issued and not a copy of form CK2 signed and dated by the Registrar as previously. If a member of a close corporation dies an Amended Founding Statement must be lodged with the Registrar and the last page of the form must be signed by the executor of the estate of the deceased or by the Magistrate if no executor has been appointed. The form must be accompanied by the letter of appointment of the Executor as well as the deceased's death certificate.
7. Other changes in respect of a close corporation If the name, financial year end or principal business of the close corporation is changed, an amended founding statement (form CK2) must be lodged and a stamp duty of R30.00 must be paid. If the name is changed the approved form CK7 must be attached to the form. In the case of a change relating to the principal business form CK2 must be lodged within 28 days of such change. In the case of a change of the name of the close corporation or a change of the financial year end form CK2 must first be lodged before such a change can take effect, either on the date of registration or at a later date mentioned in the statement. If the postal address, registered address or detail of the accounting officer is changed or if a new accounting officer is appointed, an amended founding statement (form CK2A) must be lodged with the Registrar. These changes also only take place after lodgement of form CK2A. No stamp duty is payable. The form must be signed by each member or the accounting officer of the close corporation on both pages. In the case of the appointment of a new accounting officer, page 1 must be signed by each member. An original letter of consent signed by the new accounting officer must accompany the form. The form must be printed on white paper and only one copy of the form must be lodged. It is recommended that two copies be lodged and that a stamped copy be retained as proof of lodgement. The changes will take effect when the form is registered by the Registrar. A certificate of amended founding statement will be issued and not a copy of form CK2A signed and dated by the Registrar as previously.
Every close corporation must appoint an accounting officer. This person must be a member of one of the following recognised professions:
The letter of appointment from the accounting officer must be on a letterhead containing his details and must be signed. The original copy of the letter must be lodged together with the founding statement or the amended founding statement, as the case may be. If a
vacancy occurs in the office of the accounting
officer, whether as a result of removal, resignation or otherwise, the
close corporation must within 28 days appoint
another accounting officer by lodging an amended founding statement. Click
on the icon to see the relevant section.
The close corporation must inform its accounting officer in writing of his removal from office. An accounting officer must on resignation or removal from office inform every member of the close corporation thereof in writing, and send a copy of the letter to the last known address of the registered office of the close corporation. He must also inform the Registrar by registered post of 1) the fact that he has resigned or been removed from office, 2) the date of his resignation or removal from office, 3) the date up to which he performed his duties, and 4) the fact that at the date of his resignation or removal from office he was not aware of any matters in the financial affairs of the close corporation which were in contravention of the provisions of the Act. If the accounting officer is of the opinion that he was removed for improper reasons, he must inform the Registrar thereof by registered post and send a copy of the letter to every member. An accounting officer of a close corporation has a right of access to the accounting records and all the books and documents of the close corporation at all times, and to require from members such information and explanations as he considers necessary for the performance of his duties as an accounting officer. The remuneration of an accounting officer is determined by agreement with the close corporation. The statutory duties of an accounting officer are as follows:
9. Accounting records and annual financial statements A close corporation must keep in one of the official languages of the Republic of South Africa such accounting records as are necessary fairly to present the state of affairs and business of the close corporation and to explain the transactions and financial position of the business of the close corporation. The annual financial statements of the close corporation are in turn based on such accounting records. The accounting records must include the following:
The accounting records relating to the following matters must contain sufficient detail of individual transactions to enable the nature and purpose thereof to be clearly identified:
The accounting records must be kept in such a manner as to provide adequate precautions against falsification and to facilitate the discovery of any falsification. The accounting records must be kept at the place or places of business or at the registered address of the close corporation and be kept open at all reasonable times for inspection by a member. Any close corporation which fails to comply with any of these provisions relating to accounting records and every member thereof who is a party to such failure or who fails to take all reasonable steps to secure compliance by the close corporation with any such provisions, is guilty of an offence. The members of a close corporation must, within nine months after the end of every financial year of the close corporation, cause annual financial statements in respect of that year to be made out in one of the official languages of the Republic of South Africa. The annual financial statements of a close corporation must consist of the following:
The annual financial statements must, in conformity with generally accepted accounting practice, appropriate to the business of the close corporation, fairly present the state of affairs of the close corporation as at the end of the financial year concerned, and the results of its operations for that year. The annual financial statements must disclose separately the aggregate amounts, as at the end of the financial year, of contributions by members, undrawn profits, revaluations of fixed assets and amounts of loans to or from members, and the movements in these amounts during the year. The financial statements must be in agreement with the accounting records. These records must be kept in such a manner that the financial statements can be drafted therefrom in accordance with the requirements set out above. The records must also enable the accounting officer to report to the close corporation that the annual financial statements are in agreement with such financial records and to state the accounting policy applied in these statements. It is not the legal duty of the accounting officer to perform any audit. He must merely report to members on the annual financial statements in the manner prescribed by the Act. The annual financial statements must be approved and signed by or on behalf of a member, or members, holding an interest of at least 51%. Any member of a close corporation who fails to comply with the above provisions shall be guilty of an offence.
10. Association agreement and other agreements An association agreement is a written agreement between members of a close corporation regulating the internal relations between them inter se and between them and the close corporation. It is not a prerequisite to enter into an association agreement although it is advisable. In the absence of such an agreement the following rules in respect of internal relations in a close corporation shall apply:
The association agreement serves to state the procedures to be adopted in the administration of the corporate body, it deals with matters normally dealt with in a partnership agreement, particularly matters relating to financing the business, grounds for terminating membership, taking over of the interests of a retiring member, restraints on retiring members, valuation of a retiring member's interest, etc and 3) it deals with matters such as the division of powers in the close corporation, the designation of representatives of the close corporation and the percentage profit sharing and matters of policy. When a close corporation has two or more members they can enter into a written association agreement. It must be signed by or on behalf of each member. The agreement may regulate any matter regarding the internal relationship between the members or the member and the close corporation as long as it is not inconsistent with the Act or other provisions of the law. A copy of the agreement must be kept at the registered office where it may be inspected by any member. A person who is not a member is not entitled to inspect the agreement. New members automatically become bound by a formal association agreement without having to sign it and they remain bound even after they have ceased to be members. Amendments to and cancellation of an association agreement must be in writing and signed by or on behalf of every member including a new member. In order to allow members of a close corporation even greater flexibility in arranging their internal affairs according to their own needs, they can also enter into other agreements that may deal with any matter that may be regulated by an association agreement and shall be equally valid insofar as it is not inconsistent with the association agreement or the provisions of the Act. This agreement need not be in writing, signed by the parties and be kept available at the registered office. It binds the parties thereto only as long as they remain members of the close corporation. Therefore new members or members ceasing to be such are not bound thereby. Such "informal" agreements are subordinate to the formal association agreement in case of inconsistency between the two.
11. Management of the close corporation The members may elect whether to conduct the management of the close corporation in accordance with the provisions of the Act or in accordance with an association agreement. The Act contains the following provisions in regard to the management of the close corporation which apply unless varied or altered by an association agreement:
Members of a close corporation stand in a close relationship towards each other and in this respect are akin to partners. However, they owe their fiduciary duties to the close corporation as a separate legal persona and not to each other as in the case of partners. According to section 42(2) of the Act each member must act honestly and in good faith and must exercise the powers he has regarding its management and of representing the close corporation in its interests and for its benefit. A member must not exceed his powers. A member must avoid a conflict between his interests and those of the close corporation, and in particular may not derive unwarranted personal economic benefit from the close corporation, nor compete with it in its business activities. A member who has breached his fiduciary duty is liable to the close corporation for any loss suffered as a result thereof or for any economic benefit derived by him as a result of the breach. Section 43 of the Act states that the duty of members of the close corporation is to act with due care and skill. A member shall be liable to the close corporation for loss caused by his failure in the carrying on of the business to act with the degree of care and skill that may reasonably be expected from a person of his knowledge and experience. Where a member or a former member of a close corporation is liable to the close corporation 1) to make an initial contribution or any additional contribution as agreed upon by the members, or 2) on account of the breach of a duty arising from his fiduciary relationship with the close corporation or the negligence in carrying on the affairs of the close corporation, any other member of the close corporation may institute proceedings in respect of any such liability on behalf of the close corporation against such member or former member after notifying all other members of the close corporation of his intention to do so. The member institutes the action on behalf of the close corporation and the close corporation is liable for costs, not the member acting on its behalf. In order to maintain solvency, the following rules apply with regard to the payments to members:
Without the prior express consent in writing of all its members, a person convicted of certain crimes involving dishonesty or in connection with the formation or management of a company or close corporation and who have been sentenced to imprisonment therefor for at least six months, may not, directly or indirectly, make a loan:
and may not provide any security to any persons in connection with any obligation of any such member, or other close corporation, company or other juristic person.
12. Conversion of a company into a close corporation Any company having ten or fewer members may be converted into a close corporation in terms of Section 29 of the Act, provided that every member of the company becomes a member of the close corporation. The following must be lodged with the Registrar:
On the first page of form CK1 the aggregate of the contributions of the members shall be for an amount not greater than the excess of the fair value of the assets to be acquired by the close corporation over the liabilities to be assumed by the close corporation by reason of the conversion: Provided that the close corporation may treat any portion of such excess not reflected as members' contributions, as amounts which may be distributed to its members. The members' interests need not necessarily be in proportion to the number of shares in the company held by the respective members at the time of the conversion. On the registration of a close corporation converted from a company, the assets, rights, liabilities and obligations of the company shall vest in the corporation. Any legal proceedings instituted by or against the company before the registration may be continued by or against the close corporation, and any other thing done by or in respect of the company shall be deemed to have been done by or in respect of the close corporation. The close corporation must forthwith after its conversion from a company, give notice in writing of the conversion to all creditors of the company at the time of conversion, and to all other parties to contracts or legal proceedings in which the company was involved at the time of the conversion.
13. Deregistration of a close corporation Deregistration in terms of Section 26 of the Act means the cancellation of the registration of the close corporation's founding statement. It means the loss of the entity's legal status but it does not end the existence of the close corporation. The existence of a close corporation is only lost when it is dissolved after completion of a liquidation process. If the members of a close corporation wish to deregister the entity they have to inform the Registrar by signing a written statement to the effect that the close corporation has ceased to carry on business and has no assets or liabilities. The Registrar may also, if he has reasonable cause to belief that a close corporation is not carrying on business or is not in operation, serve on the close corporation at its postal address a letter by certified post in which the close corporation is notified thereof and informed that if he is not within 60 days from the date of his letter informed in writing that the close corporation is carrying on business or is in operation, the close corporation will, unless good cause is shown to the contrary, be deregistered. Where a close corporation has been deregistered the Registrar shall give notice to that effect in the Government Gazette, and the date of the publication of such notice shall be deemed to be the date of deregistration. The deregistration of a close corporation shall not affect any liability of a member of the close corporation to the close corporation or to any other person, and such liability may be enforced as if the close corporation was not deregistered. If a close corporation is deregistered while having outstanding liabilities, the persons who are members of such corporation at the time of deregistration shall be jointly and severally liable for such liabilities.
14. Restoration of a close corporation The Registrar may on application by any interested person, if he is satisfied that a close corporation was at the time of its deregistration carrying on business or was in operation, or that it is otherwise just that the registration of the close corporation be restored, restore the said close corporation. To restore a close corporation, the following documents must be lodged:
The Registrar shall give notice of the restoration of the registration of a close corporation in the Government Gazette, and as from the date of such notice the corporation shall continue to exist and be deemed to have continued in existence as from the date of deregistration as if it were not deregistered.
15. Liquidation of a close corporation A close corporation can be liquidated either voluntarily, upon the initiation of members, or by the court, upon the application of either members or creditors. A close corporation may be liquidated voluntarily if all its members so resolve and sign a written resolution that the close corporation be liquidated voluntarily by members or creditors. A copy of the written resolution (form CK6), in duplicate, must be lodged with the Registrar within 28 days of the date on which such resolution was passed, and the Registrar must register the resolution. The stamp duty on this form is R40.00. If registration does not take place within 90 days of the date on which the resolution was passed, it lapses and becomes void. The Registrar will not issue a fine if the document is not lodged within 28 days of the date of the meeting as the Registrar mainly looks to see if the period of 90 days has not lapsed. The resolution does not become effective until its registration. A copy of the minutes of the meeting must be attached to form CK6 although it would not be required if the close corporation has one member only. If the application for liquidation is done by the members of the close corporation , security, to the satisfaction of the Master of the Supreme Court, for the payment of the debts of the close corporation must be furnished before registration of the resolution. In the case of an application by creditors this is not necessary. Application for liquidation by members or creditors may be made to the magistrate's court within whose area of jurisdiction the registered office or main place of business of the close corporation is situated. A close corporation may be liquidated by the court if:
Notice of a liquidation order or of a voluntary liquidation shall be given in the Government Gazette, as well as to certain sheriffs, messengers of the court and registrar. The liquidation takes place under the supervision of the Master of the Supreme Court, who, in the case of a liquidation by the court, is the Master having jurisdiction in the area of jurisdiction of the court where the application is made and in the case of a voluntary liquidation, is the Master having jurisdiction in the area in which the registered office of the close corporation is situated. The Master must appoint a suitable natural person as a liquidator as soon as it is practicable after a provisional liquidation order has been made or a copy of a resolution for a voluntary liquidation has been registered. No provisional liquidator is appointed. The liquidator must, as soon as possible, and, except with the consent of the Master, not later than one month after a final liquidation order has been granted by the court or a resolution of a creditors' voluntary liquidation has been registered, summon a meeting of the creditors of the close corporation. This meeting is summoned for the purpose of:
At this first meeting the liquidator is in a position to report to the creditors and is authorised to realise assets. The liquidator must also summon a meeting of members of the close corporation. This meeting is summoned for the purpose of:
There is no provision for resolving a conflict by creditors and members. Civil legal proceedings by or against a close corporation are suspended until the appointment of a liquidator and any attachment or execution put in force against the estate or assets of the close corporation after the commencement of the liquidation shall be void. Except in the case of a members' voluntary liquidation a liquidator must, as soon as practicable and except with the consent of the Master, not later than three months after the date of his appointment, submit a report on the following matters to a general meeting of creditors and members of the close corporation:
The liquidator of a close corporation unable to pay its debts must ascertain whether members or former members of the close corporation are liable to make repayments. He must also ascertain whether circumstances justify an approach to the Master for a direction that members or former members make repayments. The liquidator may enforce such repayments, and, in the event of the death of a member or former member or the insolvency of his estate, claim the amount due from the estate. Liability for repayments may arise from payment made by reason of membership, or from payment of salaries or other remuneration. In both types of repayment, the liquidator may forward a certificate by the Master as to the amount payable by a member or former member to the clerk of the magistrate's court, who must record it. The notice then has the effect of a civil judgment. In the case of repayments arising from membership, no member of a close corporation which is being liquidated is liable for the repayment of any payment made by the close corporation to him only by reason of his membership, if such payment complies with the following requirements:
In the liquidation of a close corporation unable to pay its debts, any such payment made to a member by reason of his membership only within a period of two years before the commencement of the liquidation of the close corporation must be repaid to the close corporation by the member unless he can prove that:
A person who has ceased to be a member of the close corporation concerned within the said period of two years is also liable for any repayment referred to in the preceding paragraph if and to the extent that repayments by present members, together with all other available assets, are insufficient for paying all debts of the close corporation. In the case of repayments of salary or remuneration, if a close corporation being liquidated is unable to pay its debts and:
the Master must direct that such payment, or such part thereof as he may determine, be repaid by such member to the close corporation. Any person who has, within the two-year period, ceased to be a member of a close corporation may, under the circumstances referred to above, be directed by the Master to make a repayment if, and to the extent that, any such repayments by present members are, together with all other available assets, insufficient for paying all the debts of the close corporation. If it appears during the course of the liquidation that any person who took part in the formation of the close corporation, or any former or present member, officer or accounting officer of the close corporation has misapplied or retained or become liable or accountable for any money or property of the close corporation, or has been guilty of any breach of trust in relation to the close corporation a court may, on the application of the Master, liquidator or any creditor or member, inquire into the conduct of such person, member, officer or accounting officer, and may order him to repay or restore the money or property or to contribute such sum to the assets of the close corporation by way of compensation or damages in respect of the misapplication, retention or breach of trust, as the court considers just. In the liquidation of a close corporation unable to pay its debts any person (the "offeror") may, at any time after the commencement of the liquidation of the close corporation, submit to the liquidator a written offer of composition. If the liquidator is of the opinion that creditors will probably accept the offer, he must post a copy of the offer together with his report thereon and an explanation of the offer to every known creditor and also the Master. If the liquidator decides that there is no likelihood that creditors will accept the offer or if he has insufficient information to make a recommendation, he must inform the offeror in writing that the offer is unacceptable and that he does not propose to send the offer to the creditors and the Master. In the latter case the offeror may, within 30 days of such notification by the liquidator, make representations in writing, presumably after notification by the Master. The Master may, after considering the representation and comment, direct the liquidator to send the offer, the report by the liquidator and the explanation of the offer to the creditors. When the offer is sent to the creditors and the Master, the liquidator must simultaneously with the dispatch of the copy of the offer, give notice of a general meeting of creditors for purpose of considering the offer. The notice must be given to creditors and the Master not less than 10 days and not more than 28 days before the date of such a meeting. At the meeting of creditors, the offer must be accepted by creditors whose votes amount to not less than two-thirds in number of proved creditors. If the offer is accepted by the prescribed majorities, the composition will bind every person who had notice and was entitled to vote at the meeting. The composition will be binding provided that
A composition shall not affect the liability of a surety of the close corporation. The offer of composition may be made subject to the setting aside of the liquidation order. The liquidator of the close corporation plays an important part in the composition, and apart from the fact that he has a discretion to submit it to the creditors, he must also draw up an account and plan of distribution of all the assets that are or will become available to the creditors under an approved composition. Any money to be paid and anything to be done for the benefit of the creditors in terms of the composition must be done through the liquidator. Creditors who have failed to prove their claims before the final distribution amongst creditors is made, shall nevertheless be entitled to prove a claim and share in the distribution up to the amount they are entitled to in terms of the composition. A late claim must, however, be proved before the expiration of six (6) months from the date of the meeting at which the composition was accepted. After the period of six months, leave of the court or Master must be obtained to prove a claim and payment of such costs or part thereof for the late proof as the court or Master may direct must be made. The offeror may apply to court for the setting aside of the liquidation order, provided the accepted offer of compromise makes provision for it. The offeror must publish a notice of the intended application in the Government Gazette not less than three (3) weeks before the application and a copy of the application must be served on the Master and the liquidator. This application may be opposed by any creditor or interested party on the following grounds:
When the affairs of the close corporation have been completely liquidated, the Master sends a certificate to that effect to the Registrar, who then gives notice of the dissolution in the Government Gazette. The date of dissolution is the date on which the Registrar records the dissolution of the close corporation. The dissolution of a close corporation may be declared void by a court upon the application of the liquidator or any other interested person.
Bibliography Cilliers HS and Benade ML Corporate Law 3rd ed Butterworths 2000 Cilliers HS, Benade ML, Henning JJ, du Plessis JJ, Delport PA, Fourie JSA & de Koker l Ondernemingsreg Butterworths 1993
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