If you have not paid your annual returns timeously the Companies and Intellectual Property Commission (CIPC) will assume that the company is inactive and begin the process of deregistration of the company. The effect of this will be that the company will cease to exist in terms of Section 82 of the Companies Act 71 of 2008.

The consequences of a company which ceases to exist is far reaching.  The director’s conduct on behalf of a deregistered company is automatically void and all assets of the company automatically belong to the State. Whilst the Companies and Intellectual Property Commission endeavour to notify companies that it is in the process of deregistering, deregistration can occur in  certain instances and the company, its director or third party remains blissfully unaware of the deregistration.

What do you need to do if your company falls into this position? Apply for reinstatement of the company immediately. This will involve an expensive procedure whereby the CIPC will insist in the filing of all outstanding annual returns and payment of the prescribed fees.

The question which follows is what happens to contracts concluded by a Company whilst deregistered? The Supreme Court of Appeal has recently settled this in the decision of Newlands Surgical Clinic (Pty) Ltd v Peninsula Eye Clinic (Pty) Ltd (086/2014) [2015] ZASCA 25, where it held that the reinstatement of a company is fully retrospective in that its actions while deregistered is validated and all the assets automatically revert back to company.

To avoid any uncertainty with regard to the existence of a company or the expenses of a registration process, file your annual returns timeously.

 

 

 

About The Author

Nicolene Schoeman-Louw

I founded the firm Schoemanlaw Inc in 2007 aged 24 and am the Managing Director of the firm. I am an admitted attorney of the High Court of South Africa, as well as a Conveyancer , Notary Public and Mediator. I obtained my LLB degree cum laude and successfully completed my LLM degree (dissertation) in commercial law and B-BBEE at the University of the Free State. In addition I obtained my postgraduate diploma in financial planning (CFP) at the University of Stellenbosch. An abstract of my LLM dissertation was published in the Journal for Estate Planning in 2006 and is regularly published in De Rebus (the SA attorneys’ journal) as well as Without Prejudice and Polity.org (legalbriefs). I also write regularly for various online publications such as Spice for Life and other mainstream publications such as The Entrepreneur Magazine, Personal Finance Magazine and have a regular slot on SAfm’s The Law Report with Karen Key. For more information visit http://www.schoemanlaw.co.za/about-us/

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