During the registration of a company or close corporation that entity acquires a legal personality. This legal personality comes to an end when the directors and/or members decide to deregister the entity. A company or close corporation can be deregistered in one or more of the following ways:
- by means of a request from the directors and/or members of the company or close corporation or a similar request by a third party in instances where the entity is no longer trading, has no assets or liabilities and there is no reasonable likelihood that it will be liquidated;
- by means of a request from the Companies and Intellectual Property Commission (CIPC) in instances where a company or close corporation’s prescribed annual returns have been outstanding for two years or longer;
- by means of a request from the CIPC when it is found that a company or close corporation has for at least seven years been inactive and no person has demonstrated a reasonable interest in the continued existence of the entity; and
- in instances where the registration of the company and/or close corporation is transferred to a foreign jurisdiction.
In terms of Article 33 of the Companies Act No. 71 of 2008 (the Act) companies and close corporations are required to submit annual returns to the CIPC. The purpose of such CIPC return is to confirm that:
- a company or close corporation is in business;
- a company or close corporation is trading; and
- a company or close corporation will still be in business and trading in the near future.
If a company or close corporation fails to submit the prescribed CIPC returns for two or more years the CIPC will assume that the entity is inactive and will take the necessary steps to deregister it. The effect of such deregistration will be the following:
- that the company or close corporation will be deprived of its legal personality and will consequently no longer be able to enter into binding business transactions and agreements;
- that the company or close corporation may no longer trade under its registered name;
- that the assets of a deregistered company or close corporation are automatically transferred to the state as bona vacantia;
- that, should there be existing debts to creditors, these debts are not cancelled but become unenforceable against the entity;
- that CIPC removes the name of the company or close corporation from the register and the name becomes available for future use;
- that any summons served on a deregistered company or close corporation cannot be enforced but also that a deregistered company or close corporation may not serve a summons on a debtor that fails to pay.
In an instance where CIPC deregisters a company or close corporation as described above, any interested person, including a third party who has a direct or indirect financial interest in the company or close corporation, may apply to have the deregistration reversed. It is also possible to apply to the court to request CIPC to reverse the deregistration.
When the deregistration of a company or close corporation is reversed, the company or close corporation acquires similar legal personality, and any rights or privileges that existed before deregistration again vests in the company or close corporation. The general effect is that the entity is deemed not to have been deregistered in the first place.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)