Written by Suzette Janse van Rensburg
The Companies and Intellectual Property Commission (CIPC) recently during February 2015 has published a notice relating to the final deregistration of approximately 23 000 companies and close corporations who failed to comply with the filing of their annual returns on time, as is required by the Companies Act 71 of 2008 (the “Act”).
What is an annual return?
An annual return is a statutory document and the purpose for the filing thereof is to confirm that the company or close corporation is still conducting business activities, or it will be in business in the near future, and to ensure that CIPC is in possession of the most up to date information of the company or close corporation.
Annual returns may only be filed electronically via the CIPC website.
Who must file an annual return?
All close corporations, profit and not for profit companies, including external companies, are required by law to file their annual returns with CIPC within a certain period of time on an annual basis. Organisations are further required to either file its audited or reviewed financials with its annual returns.
Different filing dates and fee structures are applicable in respect of companies and close corporations.
• Companies are required to file their annual returns within 30 business days after the company’s anniversary date of its incorporation.
• Close corporations are required to file their annual returns within the anniversary month of its incorporation up until the month thereafter.
• The prescribed fees are legislated (including the penalties for late filing) and are based on the company or close corporation’s annual turnover.
Deregistration due to noncompliance to submit annual returns
A clear distinction must be made between a voluntary or compulsory deregistration. When two or more successive annual returns are outstanding, the CIPC system automatically triggered compulsory deregistration of the entity. CIPC will mail the pending deregistration notice to the entity’s registered postal address as per their records to inform the company or close corporation of the intention to deregister it (“in deregistration process”). If no objection or filing of outstanding annual returns occurs during this period, the organisation will be placed in “final deregistered” status. If your contact details are outdated or incorrect, CIPC is not liable if you have not received such notification before final deregistration.
If an entity has been placed in deregistration process, it will still have the opportunity to submit its outstanding annual returns while in this status. However, once a company or close corporation is in final deregistration status, no annual return or objection can be processed and the route of re-instatement of the entity should be followed.
The consequences of deregistration due to non compliance
Deregistration can have dire consequences for the entity itself as well as for creditors.
• The entity is deprived of its legal existence. It can therefore no longer trade in the name of the organisation and no longer has the capacity to enter into binding business transactions.
• Upon deregistration all assets, movable and immovable, are forfeited to the State as bona vacantia assets.
• CIPC will remove the name of the entity from the register. The name will become available for use to any other party who may acquire the name.
• In Barclays National Bank Ltd v Kalk 1981 (4) SA 291 (W)1 it was held that a debt that is due to a creditor of a deregistered company or close corporation is not extinguished, but merely rendered unenforceable against the entity.
• Any summons served on a deregistered entity cannot be enforced; similarly the deregistered entity cannot issue summons against a defaulting debtor.
No provision is made in the Act to inform creditors of the pending deregistration of an organisation. It is therefore advisable that any person or entity must check the status of company or close corporation they are dealing with to ensure that it is still registered with CIPC.
Can a company or close corporation be re-instated after final deregistration due to annual return non compliance?
Yes. In terms of the Companies Act and the Close Corporations Act of 1984, any interested person (including a third party who has a direct or indirect financial interest) may apply in the prescribed manner and form to CIPC to restore the registration of the entity. If re-instated, the entity’s legal existence revives and any rights and obligations that existed immediately prior to deregistration are re-instated. The general effect is that the company will be deemed not to have been deregistered at all.
The re-instatement process can take a few months, but is fairly simple. An application with supporting documents should be made to CIPC to re-instate the entity. The documents include an affidavit indicating the reason for the non-filing of annual returns and proof that the entity was in business or that it had any outstanding assets and/or liabilities at the time of deregistration. If the entity has immovable property, one of the requirements is to submit a “no objection” letter from the Department of Public Works that they have no objection to the re-instatement.
Upon the processing of the re-instatement application, the status will be changed to “re-instatement process” where after all outstanding annual returns must be filed in order to change the status to “in business”, although the legal persona of the entity would have been re-instated upon the processing of the re-instatement application.
Any questions relating to this subject may be referred to Suzette Janse van Rensburg by sending an e-mail to firstname.lastname@example.org or by calling her on (012) 307 3337.