# General Business Category > Entrepreneurship and Business Management Forum >  New Companies Act and Informal SME?

## Profile retired

I was just wondering how the newly promulgated Companies Act will affect small businesses, for example;

A Closed Corporation X was de-registered 12 months ago. The two given past CC members now proceed to open a partnership bank account in the name of the de-registered CC (Name minus CC at the end), continuing to trade under the name of this de-registered CC.

What is now required to comply with this new Company Act, if any by this informal SME?

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## Mark Atkinson

Ermmm,

As far as I know, if you are running the business as a partnership, the Companies Act will have no effect on the running of the business. The Companies Act only governs companies, private/public. 

So to answer your question, nothing is required to comply, assuming the business is now a partnership.




> continuing to trade under the name of this de-registered CC


I hope you are not trading as a CC when the CC no longer exists because that _IS_ illegal.

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## Profile retired

Thanks Mark
Allow me amend the example slightly;
"Jo Soap Trading CC" with two members was de-register 12 Months ago from the CIPRO Records.

*Example 1:* The two partners open an "Partnership" bank  account in the name of "Jo Soap Trading" to conitine trading without the CIPRO requirements.

*Example 2:* The one owner opens an "Sole Proprietary" bank account with the partner having account signing power in the name "Jo Soap Trading" to continue trading without  
                   CIPRO requirements. 

What is now required to comply with this *New Company Act*, if any by this informal SME?

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## Mark Atkinson

Once again, in both those examples, you are not dealing with a separate juristic person (CC or Company). Both partnerships and sole props are "extensions" of the people who are running them, if you choose to look at it that it way.  Neither one is governed by the Companies Act. 

The way I read it, by saying you're opening "Partnership"/"Sole prop" bank accounts you're implying that you are now running the business as a partnership or a sole proprietor? Am I right? If so, you would need to prepare the financial statements as such. 

Basically, partnerships and sole props are not governed by the Companies Act seeing as the owners of a partnership/sole prop have personal liability for the company's debts. If you had to convert the CC to a private/public company, *then* only would you need to satisfy the requirements of the Companies Act.

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Profile retired (25-Apr-11)

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## Profile retired

Mark 
Many thanks

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## Dave A

I saw a potential issue as being the rights to the name.

The CC had the rights to the name - who has the rights once the cc has been deregistered?
My thought was that seeing as the members become responsible for the liabilities of the cc on deregistration, it is fair to assume they jointly inherit the assets too.

This wouldn't pose a problem if the members continue in partnership, but it could pose a problem if any of the members were *not* included in the new partnership.

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## Mark Atkinson

> I saw a potential issue as being the rights to the name.
> 
> The CC had the rights to the name - who has the rights once the cc has been deregistered?
> My thought was that seeing as the members become responsible for the liabilities of the cc on deregistration, it is fair to assume they jointly inherit the assets too.


I'm not sure that anybody "inherits" the right to the name after a CC is deregistered.  I stand to be corrected, but I think that once a CC is deregistered, that name becomes available for use by anybody again. I don't think you can view the name of the business as an "asset" per say. 

Also, I'm not sure whether there is much that actually stops a Partnership from using a registered name, seeing as it is operating "informally".  The CC could look to the courts for an interdict, but that is tedious and seeing as the CC no longer exists, I'm not sure that anybody would have any way of stopping somebody from using the name, besides registering it as a Trademark.

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## BusFact

I tend to agree with what Mark has posted above.

The only thing I see changing when the act eventually comes into effect will be the use of the "trading as" name. This is something Dave brought up in a previous post. Essentially all sole proprietors using a trading name will have to register that name with Cipro (or its replacement). The only exception will be if you are trading as the name in your ID book.

So, if Joe Soap trading is already going by the time the act comes into existence, they will have to register their name within some period. If they start trading after the act comes into existence, they will need to register is straightaway.

Except for the above, I don't think the Act will have anything else do do with them as they are sole proprietors and not corpotate entities.

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## Profile retired

Thanks for all the input. I have heard the phrase "Defensive Name" mentioned at one stage. Just for interest sake  "Jo Soap Trading CC" closed without any assets.

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## Dave A

> I stand to be corrected, but I think that once a CC is deregistered, that name becomes available for use by anybody again.


I don't know for sure either way how things stand nowadays. So much seems to have changed, or simply got sloppy (like checking for similar names conflicts). But many years ago, before there was such a thing as deregistration of companies, a company had to be "inactive" for 5 years before someone else could use the same or similar name. 

I'd also bear in mind that along with deregistrations has come that wonderful curve ball, reregistration of companies. Perhaps not likely in this case, but something to bear in mind in any right-to-name discussion.

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## KimH

Does anyone have a link to a summary of what existing CC's must do now to be compliant with the Act?

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## Mark Atkinson

> Does anyone have a link to a summary of what existing CC's must do now to be compliant with the Act?


1) No new CCs can be created.
2) Companies can no longer be converted to CCs. 

As far as I know that's the majority of the requirements to do with CCs. Your existing CC will still have to comply with the requirements of the Close Corporations Act. 

Don't think there's anything else. Correct me if I'm wrong.  :Smile:

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KimH (10-May-11)

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## KimH

So as existing CC's we don't have to convert to some new fangled type of entity.  Business as usual except we have to draw up a MOI?
(I own 100% interest in my company, I do not offer shares.)

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## Mark Atkinson

Pretty much.  :Smile:  To my knowledge, existing CCs will remain CCs, honouring their perpetual existence.  I wasn't actually aware that you had to draw up a MOI.  You are probably right, but I just find it strange that it wasn't included in my syllabus (studying the new Companies Act at the moment) when CCs is one of the main focal points. 

I'll do some quick research for you.  :Smile:

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KimH (10-May-11)

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## KimH

Thanks Mark.  All I have been able to find are very lengthy references to the act - wish someone could summarise it for us less than legal types  :Big Grin:

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## Mark Atkinson

Ok, so I've skimmed through the amendments to the Close Corporations Act by the Companies Act. There are a whole lot of small tweaks that are probably irrelevant to your business. A few things to do with liquidation and dissolution of CCs, mostly.

The important thing is:




> A corporation formed in accordance with the provisions of this Act is on registration in terms of those provisions a juristic person and continues, subject to the provisions of this Act, to exist as a juristic person notwithstanding changes in its membership, or its conversion to a company in terms of Schedule 2 of the Companies Act, until it is [in terms of this Act] deregistered or dissolved...


Basically, your CC will continue to exist in compliance with the Close Corporations Act until it is deregistered or dissolved. 

Also, I could not find anything to do with having to submit a MOI. As long as your founding statement and (optionally) Articles of Association are lodged with the Registrar, I can't see anything else you have to comply with in that regard.

One other thing:




> The members of a corporation shall within [nine] six months after the end of every financial year of the corporation cause annual financial statements in respect of that financial year to be made out in one of the official languages of the Republic.


Just a change on the slack after year end during which to submit your financial statements from 9 months to 6 months. 

Also, in some instances, where a private company is required to be audited as determined by the Minister, a CC may also be subject to an audit of its financial statements.

Your accounting officer should inform you of that kind of requirement, though.  :Smile: 

Hope that helps!

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KimH (10-May-11)

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## KimH

Mark, that helps tremendously.
I can't thank you enough for taking the time and trouble to get this information for me.
When you are in CPT... let me know - I owe you a beer or 4  :Big Grin:

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## BusFact

Companies_Act_Guide Pg 22.pdf Some further confirmation  on what Mark has sent, off the DTI companies act guide on page 22.

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KimH (11-May-11)

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## RogerH

A CC will only need to do an MOI when it converts into a Company - this is not required but will be done for free within the next 3 years (according to the DTI). the process of conversion also provides an opportunity to revise and redesign a businesses structure - some of the areas that can be looked at during the conversion are highlighted HERE

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## JohnSilver

IS there still a benefit of keeping a CC, instead of converting to a company?

And what is a MOI?

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## BusFact

MOI - Memorandum of Incorporation (or something similar). Basically its the rules and constitution of your business.

The new type of company and the old cc are virtually the same thing, especially for owner managed businesses. There isn't really a strong argument either way at the moment. So I'd let inertia rule for now and not do anything.

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## Just Gone

I have just been thro this and started another business.  Have taken over an existing cc from 2008 which was deregistered - re-registered the cc by paying the penalties from 2008 only.  Cost about R1000.  Before 2008 you need not worry about. I have been told that we have 10 years to still use the old cc whereby you have to convert.  If you convert within two years from the beginning of this year it is free of charge, but no more trading as !!

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## BusFact

Hi Kevinb. I still maintain a different view on this "trading as" rule.

If you have been using a "trading as" name for a while before 2011, then you can continue using it.
If the cc you have bought has been using a "trading as" name for a while before 2011, then you can continue using it.

If you want to start using a new "trading as" name now, you cannot without registering trademarks or new companies with that specific name or through some other formal mechanism with CIPC.

The new "trading as" rules apply to any *new name* you want to use. It is irrelevant which type of organisation is going to use this "trading" name. It can be a pty / cc / trust / ltd, whatever, old or new, it doesn't matter. So I'm not sure how purchasing an old cc helps your case for using a new trading name. Nor do I agree with the opinion that conversion to a pty means you lose your existing right to use your existing trading name ... yet.

Admittedly there is a lot of confusion on this topic at the moment, so other opinions welcome.

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## Just Gone

What I said was if you buy an old cc you have to apply to obviously change to the name to what you want, then you cant /wont be a trading as.  Ok....... we want to change the cc name because it is the name of a person.  ............ i think we are saying the same thing here  :Wink:

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## BusFact

Ahhh, okay yes we are on the same track. I did not realise you were planning on changing the name of the cc. By doing this you are right, you no longer even need to be "trading as". And this is exactly want the CPA wanted. It wants people to use their company names to trade and not simply make up any name when it suits them.

Based on the above, I am still not sure why you went to the effort of buying an old cc. Why not simply open a new pty with the name you intend to change your cc to? The end result is the same I suppose, but are you not worried about unknown debts in the cc? A new company will have a clean slate.

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## Just Gone

Its cheaper to buy an existing cc than to open a new pty ltd at the mo.  No not worried - it was a dormant cc and I know the history.

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## CLIVE-TRIANGLE

The Consumer Protection Act (CPA) prohibits you from using a trading name, unless:
- You have registered it at CIPC as a Defensive Name - renewable every 2 years, or
- You (in this case the partnership) has been using it for at least 12 months prior to the introduction of the act.

The registration of either a proposed name or a defensive name is prohibited if the name is the subject of a de-registration for non-compliance with regard to annual returns. 

The CPA prescribes additional burdens regarding business names with regard to natural persons. I am not sure how this extends, if at all, to partnerships offhand.

It seems to me your best avenue would be to restore your cc.

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## CLIVE-TRIANGLE

Sorry, didn't see page 3!

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## Dave A

> Sorry, didn't see page 3!


Don't sweat it - I've made the same mistake myself many times.

Besides which the point was worth repeating  :Thumbup:

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## BusNavig8

Register a defensive name . it will cost you R200, it lasts for 2 years and will need to be renewed every two years. If it was deregistered not due to annual returns - why was it deregistered?

Thats the name issue out of the ways.

The creditor issue will not change merely due to the fact that the CC was deregistered unless it was advertised in the newspaper and the Govt Gazette. - Normal presription will apply.

The Partnership - will fall outside of the companies act as far as I am concerned as it in not a legal entity, HOWEVER, another may view such as, Im not sure what the name is for it, coat tailing or something like that and can merely complete a CoR135.1 and have the entire partnership investigated. Hence I would again place an advert in the Star or a well recognised newspaper stating that the CC is now a partnership, and all interested parties must make contact with you etc etc.

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## BusNavig8

Sorry I didnt see the post above either - if you really need it to be a partnership motivate the defensive name to CIPC per affidavit, certified copies of ID of applicant and both partners ID's and lodge with personal dealing with your old CC in legal dept. (cc section will look up on system and give you details)

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## abbacount

Could anyone assist me with the wording of the advert that one needs to place in the newspaper in order to re-register a de-registered company in line with the criteria as set out by CIPC?

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## DeonT

I don't have much to add as all has been said above already. However, as far as names of legal entities (companies) are concerned, the provisions of sections 11 and 12 of the new Companies Act will apply. You can read it online at Acts. 

The Consumer Protection Act deals with business names of any supplier (as defined in that Act) in clauses 79 - 81. This is also available online.

Hope this helps.

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