Deregistration and Reinstatement of Companies in South Africa

On 17 January 2025, the Companies and Intellectual Property Commission (“Commission”) released a media statement confirming that the Commission has commenced with a large number of de-registrations due non-compliance with annual returns and beneficial ownership fillings among others. The Commission is intensifying its focus on enforcing compliance with the Companies Act, 2008 (“Act”) and related legislation, particularly the vital requirement for companies to declare their beneficial ownership.

As of 27 January 2025, the Commission issued a notice confirming that entities failing to submit beneficial ownership declarations and their annual returns, whose company status is in the deregistration process will face deregistration, effective from 31 January 2025, with no further notification issued. This underscores the Commission's commitment to enhancing transparency within South Africa's corporate sector.

The beneficial ownership declaration measures and the deregistration of non-compliant companies forms part of the country's strategic efforts to address the action items put forward by the Financial Action Task Force (“FATF”) and to strengthen the integrity of its corporate registry, aligning with international best practices. Companies are therefore urged to act promptly, ensuring their compliance with these crucial legal obligations, to avoid the severe consequence of deregistration and contribute to South Africa's efforts in maintaining a robust, transparent financial system.

Deregistration of Companies

Deregistration of a company can occur voluntarily or automatically following a notice issued by the Commission. Both processes, though distinct, result in the company losing its legal status and ability to conduct business activities. The deregistration of a company is governed by Section 82 of the Act. The Act provides for automatic deregistration when the company has failed to file their annual returns for at least two consecutive years and has failed on show good cause for doing so, or alternatively when a company has been inactive for at least seven years with no interest shown by any interested party in the continued existence of the company. The Commission has, from 15 April 2024, blocked the filling of annual returns where beneficial ownership filling is not up to date, which will allow the Commission to refer companies for deregistration if the company has failed to file annual returns for at least two years.

Voluntary deregistration on the other hand occurs when the shareholders of a company decide to close down the company of their own accord. Under Section 82(3)(b)(ii) of the Act, the Commission is required to deregister a company upon request, but it may only do so if  the company has ceased to carry on business, has no assets, or has no reasonable prospect of being liquidated. Voluntary deregistration can also take place where the registration of a company is being transferred to a foreign jurisdiction following a special resolution of the shareholders and satisfying the requirements for deregistration that may be prescribed by the Minister.

For voluntary deregistration to occur, the company must ensure that all its tax and regulatory obligations have been fulfilled. Once the deregistration process is completed, the company loses its legal status and is no longer recognised as a juristic entity. When a company owns any assets or have any legal claims against third parties before the company is removed from the register such assets or claims become bona vacantia. In Matjhabeng Local Municipality v McDonald and Others, the applicant sought a declaration that the properties of deregistered companies be deemed bona vacantia and the Registrar of Deeds be directed to facilitate the transfer of the property. The court ruled that based on the bona vacantia principle, property belonging to deregistered companies automatically accrued to the State. Additionally, the principle prevents creditors from instituting legal proceeding against the company and may lose their security if the secured assets become bona vacantia.

Reinstatement of Deregistered Companies

Reinstatement provides a route for deregistered companies to regain their legal status and resume operations. This process is governed by section 82(4) of the Act and the guidelines set by the Commission, offering a pathway for the reinstatement of companies after deregistration has occurred. Reinstatement is only possible under specific conditions outlined by the Commission.

A company can apply for reinstatement by way of a formal application submitted to the Commission, including all necessary supporting documentation such as evidence that the company was actively conducting business at the time of deregistration or if the company has immovable property registered in its name. Interested parties such as creditors can apply for a court order reinstating the company.

In accordance with Section 82(4) of the Act, a company seeking reinstatement must rectify all outstanding compliance issues, such as submitting overdue annual returns and paying any outstanding fees unless the reinstatement was made by an order of the court. The company must also file its beneficial ownership declaration within 30 days of the company being reinstate and settle any outstanding tax obligations with South African Revenue Services under the Income Tax Act, 1962.

Once a company is reinstated, the company regains its legal existence and is placed back on the Commission’s register. The Supreme Court of Appeal in Newlands Surgical Clinic v Peninsula Eye Clinic determined whether the restatement of a company in terms of section 82(4) of the Act was completely retrospective, which would include the actions taken by the company during the period in which it was deregistered. The court held that not only does reinstatement have the effect that a company is revested with its former assets, but also automatically validates the company’s activities that took place during the period of deregistration. The court further confirmed that although reinstatement is retrospective, any party that is prejudiced by the reinstatement and validation of the company’s activities may still make use of section 83(4) to seek just and equitable relief from the court.

Conclusion

The deregistration process underscores the importance of strict adherence to South African legislation governing companies, particularly the Act. It is essential for business owners to comprehend the full scope of deregistration, as well as the potential for reinstatement, especially when seeking to close operations or resolve non-compliance issues.

Failure to meet these obligations can result in deregistration, disrupting a company’s ability to operate. However, deregistered companies can restore their legal standing through reinstatement which will validate the company’s activities retrospectively. It is crucial for business owners to remain proactive in meeting these statutory obligations to avoid deregistration and the subsequent challenges of restoring the company’s legal status.