ANNUAL RETURNS NOT FILED, CC DE-REGISTERED AND PROPERTY GOES TO THE STATE
Outstanding paperwork can carry hefty consequences! STBB recently released this case summary...
The case summary pertains to: ABSA Bank Ltd v Companies and Intellectual Property Commission of South Africa and Others, ABSA Bank Ltd v Voigro Investment 19 CC (8250/12, 6601/2012) [2012] ZAWCHC 182 (14 November 2012)
Both the old and the new Companies Acts, read with the Close Corporation Act, provide for the deregistration of corporations that fail to file annual returns. One consequence is that a CC’s assets, including its immovable property, become bona vacantia and vested in the state.
However, unlike before, there is no express provision for the reinstatement of a deregistered company by way of an application to Court. The holder of the bond over such property will need to apply to the Commission and provide the necessary CC’s outstanding information before reinstatement can be achieved.
Absa obtained default judgment against Voigro Investments 19 CC (‘the CC’) in respect of a mortgage debt, and, on 13 December 2011, caused the mortgaged property to be attached in execution.
By that time, and unbeknownst to Absa, the property had already been sold in execution at the behest of the local municipality. Subsequent to learning this, Absa successfully obtained a provisional winding-up order against the CC.
However, prior to the return date (on which date the winding-up application was to be made final), it was discovered that the CC had in the meantime been deregistered because it did not file its annual returns. The result was that its assets (including its immovable property) became bona vacantia and vested in the state.
This prompted Absa’s present application for an order compelling the Companies and Intellectual Property Commission of South Africa (‘the CIPC’) to reinstate the CC so that the immovable property could be restored to it (the CC), and, thereafter, the winding-up process finalised. It brought the application in terms of section 83(4) of the current Act (that deals with dissolved companies) as it alleged it could not, as bondholder, comply with the section 82(4) requirements (that deal with deregistered companies).
Relevant legislationSection 82(3):
(3) In addition to the duty to deregister a company contemplated in subsection (2)(b), the Commission may otherwise remove a company from the companies register only if— (a) the company or -(i) has failed to file an annual return in terms of section 33 for two or more years in succession."
Section 82(4) states:
"(4) If the Commission deregisters a company as contemplated in subsection (3), any interested person may apply in the prescribed manner and form to the Commission, to reinstate the registration of the company".
Section 83(4) states:
"(4) At any time after a company has been dissolved—
(a) the liquidator of the company, or other person with an interest in the company, may apply to a court for an order declaring the dissolution to have been void, or any other order that is just and equitable in the circumstances; and
(b) if the court declares the dissolution to have been void, any proceedings may be taken against the company as might have been taken if the company had not been dissolved".
HELD
- Section 82(4) of the Companies Act 71 of 2008 (‘the current Act’) provides that any interested person may apply in the prescribed manner and form to the commissioner for the reinstatement of the registration of a company (or corporation, in light of section 26 of the Close Corporation Act 69 of 1984).
- Absa argued that it could not bring an application for reinstatement of the registration of the CC in terms of section 82(4) of the current Act, because it could not comply with the formalities required by this procedure. (It had to, amongst other things, provide the annual financial statements of the CC to CIPC which it said it could not access.)
Instead, Absa therefore sought to rely on section 83(4)(a) of the 2008 Companies Act (read with Section 26 of the Close Corporations Act) on the basis that it was just and equitable for the Court to order the CIPC to reinstate the CC.
- Section 83(4) provides that after a company has been dissolved, a person with an interest in the company may apply to Court for an order declaring that the dissolution was void.
- The Court rejected Absa’s application, holding that:
Dissolution and deregistration of a company are different concepts and had different consequences. After winding-up (i.e. liquidation), the company's existence is terminated for all purposes, while on deregistration the company ceases to exist as a corporation. Deregistration does not affect the existence of the company, but deprives the company of its legal personality, so that it can continue to exist as an association whose members are personally liable for its debts.
Therefore, if a close corporation has been deregistered for failing to file its annual returns, the registration thereof can be re-instated only by the Commissioner, as provided for in terms of section 82(4) of the current Act. There is no other manner in which reinstatement can occur.
No provision is made in the current Act for the restoration of a deregistered company, or in this case a deregistered Close Corporation, by order, on application to a Court.
