Is your company/close corporation still “alive”?

Perhaps the most detrimental effects of a company or close corporation that was deregistered due to non – compliance with annual returns , is the fact that all of its assets ( including fixed assets such as houses or buildings ) vested in the state.
Pam is the only member of a close corporation ( PK Investments CC ) . Three years ago, Pam decided to buy property as an investment. In order to protect the property from creditors and the rental income to isolate, Pam decided to transfer the property in the name of PK Investments CC. Pam has invested substantially in the maintenance of the property and has recently become a very attractive offer received for the sale of the property that she, as the only member of HP Investments CC , decided to accept. Unfortunately, before transfer of the home was done, the purchaser ‘s lawyer inform Pam that PK Investments CC is deregistered and the transfer of the property therefore cannot occur . Pam, unaware of the deregistration is shocked and unsure about what she should do to correct the situation.

the requirement

All companies and close corporations are required to file their annual returns to the office of the Companies and Intellectual Property Commission (” CIPC ” ) to submit within 30 days from the anniversary date of its incorporation . Failure to do so may result in the CIPC assume that the company and / or close corporation not doing business or no longer intends to do business in the near future.

A company or close corporation in the following circumstances referred for deregistration:
– By way of a voluntary application by the company or close corporation itself.
– If the CIPC believe that the company or close corporation was inactive for seven years or more.
– If the annual returns are outstanding for more than two consecutive years.


Non – compliance with the requirement of submission of annual returns can lead to the de-registration of a legal entity without the consent of the members or directors of such entity. Pam was unaware of the requirement for the submission of annual returns to CIPC and failed to do so for the past three years, which in turn lead to the deregistration of PK Investments CC .

The effect of deregistration of a company or close corporation

The de-registration of a legal entity can have serious and far-reaching consequences . The effect of deregistration of a company is that its existence as a legal person ceases and bring an end to its existence as a company. Such a company has no capacity to deal with the result that any agreements with or as a deregistered entity may be adversely affected.

The Act further provides that “the removal of a company’s name from the companies register the liability deprived of any former director or shareholder of the company or any other person in respect of any act or omission that occurred before the business of the register is removed. Any liability continues and may be enforced as if the company removed from the register is not. ”

Perhaps the most detrimental effects of a company or close corporation that was deregistered due to non – compliance with annual returns , is the fact that all of its assets ( including fixed assets such as houses or buildings ) vested in the state as bona vacantia (this i.e. goods as unclaimed and / or without an apparent owner ) .

Fortunately, the Act provides for ” any interested person ” to apply in the prescribed manner and form to the CIPC to the registration of the company or close corporation to be re-instated. Such re-instatement of the company or close corporation that revive all its rights and obligations enforceable as before the deregistration.

As such re-instatement  is a long and tedious process , it is advisable to obtain help from an accountant or  lawyer , especially if real property such as a house involved .

What is clear from the above shows is the need for the status of your company or close corporation with CIPC to verify, as well as those of any entity with which you plan to sign an agreement before entering into such an agreement. The same principle also applies with respect to litigation matters, as any action by or against a deregistered company or close corporation shall not be valid.

Courts have even given cost orders against lawyers who submit wasteful applications on behalf deregistered entities. There is therefore an obligation on lawyers to the status of an entity to confirm before instituting legal action on behalf of such an entity.

The deregistration of a company or close corporation may have adverse legal consequences as Pam, with regret, experienced. It can also be very expensive, but if the process is correctly handled with the necessary advice , many of the possible risks can be minimum.

Millers Attorneys.

share

Comments are closed.