Move to eliminate closed corporations

AS the country gears up for a radical revision of its corporate laws, the Close Corporations Act and Companies Act are set to undergo a total renewal by 2024, with one of the most contentious aspects of the proposed reform the potential elimination of close corporations (CCs).

While many jurisdictions worldwide have done away with this business entity structure, Namibia has continued to register and regulate close corporations, which have long been favoured by small and medium-sized businesses due to their flexible governance and limited liability features.

“Namibia is one of the key jurisdictions that still registers and regulates close corporations, whereas other jurisdictions have done away with this practice,” said Sikongo Haihambo, the executive director in the Ministry of Trade and Industrialisation.

He was peaking at the Namibia Corporate Law Reform Summit on Thursday,

However, critics argue that eradicating close corporations could have significant repercussions for the entrepreneurial ecosystem in Namibia.

Tiaan Bazuin, the chief executive of the Namibian Stock Exchange, highlighted the complexities and financial burden this reform would impose on the country, particularly due to the large number of businesses currently registered as close corporations.

Bazuin said authorities should instead direct their efforts towards rectifying the shortcomings of the act.

“We have a lot of CCs, and a lot of them have to be converted. It will come at great cost and effort – as it was in South Africa – to those CCs which are least in a position to make the amendments and incur those costs,” he said.
Haihambo said the new legislation seeks to align with the increasingly digitised global landscape, keeping pace with modern technological advancements.
“The new legislation aims to conform to the digitised landscape. The current legislation is outdated and highly legalistic, making it quite burdensome and costly to form and manage a company,” he said.