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You formed a NPC thinking that it would never accumulate profits, but now it sits with Retained Earnings and you can’t declare dividends. Can you convert it to a Pty?

The straight answer is No. This conversion is not allowed in terms of the Companies Act of 2008. So what must you do?

There are two issues

  1. How to extract the Retained Earnings and
  2. How to restart as a (Pty) Ltd company

These can be dealt with in the following way –

  1. All Directors and employees of a NPC are entitled to reasonable salaries or earnings. You can’t take out dividends, but you can take out income for services provided, rental of premises, interest on loans etc. You will pay Income Tax on those earnings and, presuming that the NPC was registered as an Exempt Institution at SARS, there will be no tax saving in the company.
  2. Form a new Pty Ltd company and simply do the trade through that company. You may need to keep the NPC alive if it has registrations that are required for that kind of operation. You simply need to decide where to slice its former activities between it and the Pty Ltd company.

So, all though it is technically not possible to convert a NPC to a Pty Ltd company, the above work around has the same effect.


  1. D Maharaj

    Hi Derek

    What is meant by unrelated director?

    Is it in terms of family and how far does that extend?

    Why such a rule? Would friends then not be a similar concern?


    1. Hi D,
      Unrelated means just that. However, it is generally interpreted as close relation. i.e spouse, sibling, parent or child. Best is to ensure that the surnames are different.
      I don’t write the rules, so cannot comment as to why.

  2. hi
    The conversion of an NPC to a Pty Ltd is not possible, that is well understood. The process of converting an Pty Ltd to NPC turnaround time is.?

    1. Hi Kabelo,
      We’re still struggling to get a response from CIPC. I now recall that we did convert our own Gallagher Combined School from a (Pty) Ltd to a NPC and I’ve found the documentation. It appears to have taken 4 months for CIPC to register the change.

      1. Tanya du Plessis

        Hi Derek
        Can you advise if we want to change our current company that is a trading company Pty to an NPO, please can you advise if you can help, how much will it cost, does it also go through CIPC and can we change the name at the same time when doing the change

        1. Hi Tanya,
          Yes, you can change from Pty to NPC, but not the other way round. We charge R9 120 for this job.
          A name change costs an additional R1 300 at CIPC and R900 at SARS

        1. Hi Siphamandla,
          We can do that for you. It currently costs R9 120. You will need at least 3 unrelated directors. Send me an email if you want to go ahead.

  3. Good evening
    I understood what is written well, but there’s one thing i would like to ask.

  4. Oanelanna

    Good evening
    I understood what is written well, but there’s one thing i would like to ask.

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