What is Close Corporation?

 

Actually, Close Corporation is a variant of the stock company. Its shareholders, directors and managers are usually the same people. Through this kind of small and compact team, they do not need a formal board meeting to make a decision.
In the structure of Close Corporation, the Board of Directors can be canceled, which allows the shareholders can perform the duties of the corporation and operate the companies, thereby reducing the red tape.
When selling the shares they hold, the shareholders of Close Corporation will be under certain restrictions. If shareholders decide to sell their holdings of stocks, the company and other shareholders of the company have pre-emptive rights. They are also available o the company’s Articles of the restrictions such as the stock sale, transfer and disposal.

In the management, distribution of profits, election of manager, shareholders employment and other aspects, the structure and operations of Close Corporation are similar to the mode of partnership enterprises, but entitled to al the legal protection of stock company.

In rare cases, when the shareholders of Close Corporation come to a deadlock and can not manage the company effectively, Delaware Court of Chancery may specify a fair provisional director if directors and shareholders request.

Factors:
●The number of shareholders is limited to 30 people or less—not listed
●Cancel the Board
●Shareholders perform the duties as Directors
●Shareholders manage the company directly
●Sale or transfer of shares is subject to some certain conditions
●Operate and enjoy the interests of all the stock company like the partnership enterprises
●Specify the provisional director to settle the disputes
●May apply for S-Corporation when meet all the conditions

 

Generally used for:
●Small and compact business groups
●Family Business
●The company that is less formal on the process
●Restricting share transfer