JUNE 2012 NEWSLETTER
Holes in the New
Companies Act
Introduction
Peninsula Eye Clinic Proprietary Limited
(“PEC”) and Newlands Surgical Clinic
Proprietary Limited (“NSC”) were
involved in arbitration proceedings.
The arbitrator decided the arbitration in
favour of PEC and ordered NSC to pay
a certain amount of money to PEC. NSC
appealed against the decision of the
arbitrator. NSC lost the appeal. However,
NSC refused to pay what it was required
to pay to PEC in terms of the arbitration
order. PEC then instituted an application
in the High Court to make an arbitration
award in its favour an order of the court.
After the arbitration proceeding had
been finalised, PEC realised that NSC
had been deregistered as a company
in terms of s 73 of the Companies Act,
No. 61 of 1973 (“Old Act”) since the
beginning of the arbitration proceedings.
Such deregistration was effected because
of NSC’s failure to file annual returns.
PEC then decided to seek relief from the
High Court that NSC be re-registered as
a company. This scenario depicts the set
of facts in Peninsula Eye Clinic (Pty) Ltd
v Newlands Surgical Clinic (Pty) Ltd and
Others, (21325/2011) [2012] ZAWCHC
39, handed down on 2 May 2012, as yet
unreported, (“Peninsula Case”).
In July 2010, the Companies and
Intellectual Property Registration
Office (“CIPRO”), as it was then
called, embarked on the process
of utilising s 73 of the Old Act to
deregister companies that failed to
submit annual returns as required in
terms of the Old Act. This resulted in
thousands of companies and close
corporations being deregistered.
Whilst some companies who received
correspondence from CIPRO in relation
to impending deregistrations lodged
required annual returns, paid the
prescribed fee and were reinstated,
some were not reinstated until the Old
Act was superseded by the Companies
Act, No. 71 of 2008 (“New Act”), on
1 May 2012.
For more information on this
newsletter, please contact one of
the following attorneys:
Tony Tshivhase
Director
T +27 (0)11 656 0804
E [email protected]
Old ACT, NEW ACT and Deregistrations
In terms of s 73(6) of the Old Act,
registration of a deregistered company
could be restored by any interested
person or the Registrar of Companies
(called the Commissioner in terms
of the New Act) through a High
Court application. Further, s 73(6A)
of the Old Act allowed registration
of companies deregistered due to
failure to lodge annual returns to
approach the Registrar of Companies
(called the Commissioner in terms
of the New Act) to be restored upon
payment of a prescribed fee. Both
these sections specifically provided that
the resuscitated company “…shall be
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deemed to have continued in existence
as if it had not been deregistered…”
The restoration of a deregistered
company is important to persons who
may have claims against deregistered
companies because in law when a
company is deregistered, its corporate
personality ceases similarly to death of a
human being and its assets are ‘forfeited’
to the state as ownerless property (bona
vancantia) and can therefore not be
attached by a third party who may have
a claim against a deregistered company
without first getting the deregistered
company resurrected.
Siyabonga Shandu
Director
T +27 (0)11 656 0804
E [email protected]
Holes in the New Companies Act
S 82(4) of the New Act (which
superseded ss 73(6) and 73(6A) of the
Old Act), provides as follows:
“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.”
Further, Regulation 40(7) of the New
Act provides as follows:
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“The Commission may reinstate a
deregistered company or external
company only after it has filed the
outstanding annual returns and paid
the outstanding prescribed fee in
respect thereof.”
Issues in the Peninsula Case
The New Act –
•does not make provision for
the retrospective effect of the
restoration of registration of a
deregistered company similarly to
the Old Act; and
•does not provide whether or not
the High Court has jurisdiction to
reinstate deregistered companies
similarly to the Old Act.
These issues received judicial attention
in the Peninsula Case in detail for the
first time since the commencement of
the New Act.1
In relation to the retrospective effect of
restoration of registration of companies
deregistered in terms of the Old Act,
Binns-Ward J said:
“The absence of any express provision
in s 82(4) of the 2008 Companies Act
about retrospectivity is unfortunate.
It has unnecessarily confused the
position that had been quite clearly
articulated in the equivalent provisions
of the preceding legislation, which
also expressly provided either for
the court (in respect of a restoration
of registration pursuant to an order
of court in terms of s 73(6) of the
1973 Act) to give directions or to
make provision, in the context of the
deemed continuance in existence
provided for in terms of s 73(6)(a), for
placing the affected company and all
other persons affected thereby in the
position, as nearly as may be, as if the
company had not been deregistered,
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or (in respect of a restoration of
registration by the registrar of
companies, in terms of s 73 (6A)) for
the affected company to be deemed
to have continued in existence as if
it had not been deregistered. The
question as to what the position is
currently regarding retrospectivity
when reinstatement to the register is
granted goes begging. The practical
need for retrospective consequences
to follow upon the reinstatement of a
de-registered company’s registration
is manifest. The facts of the current
matter confirm as much. [At Para [24],
Emphasis Added].2
Binns-Ward J said that the restoration
of a company in terms of the New Act
does not necessarily mean that all of its
activities during the period when it was
deregistered are automatically infused
with validity. His argument in this regard
is that the decisions of our courts in
relation to the retrospective effect of
reinstatement of a company’s registration
was based on the wording of s 73(6)
of the Old Act that specifically made
provision for retrospectivity – wording
which is not replicated in the New Act.
In regard to the question whether or
not the High Court has jurisdiction
to reinstate deregistered companies,
Binns-Ward J decided, based on
the reason that the Companies and
Intellectual Property Commission
(“CIPC”) is a juristic person established
in terms of s 185(1) of the New Act
with a statutory function to register and
deregister companies and to maintain
the register of companies, that:
“Declaratory relief in respect of the
registration status of a company
should therefore, in my view, as a
general rule, be sought from a court
only in the context of the review
of a decision or failure to make a
decision by the Commission in that
connection.” (at Para [26])
The court consequently refused to
declare that NSC be reregistered
and that its assets re-vest in NSC and
directed PEC to approach the CIPC.
The Peninsula Case is an example of
interpretation difficulties in the New
Act that South African courts have to
grapple with, especially in matters
which strangle both the Old Act and the
New Act. It is likely that there are many
companies which were deregistered
under the Old Act whose registration
has not been reinstated. For these
companies or interested persons, the
Peninsula Case makes it clear that
they have to approach the CIPC for
reinstatement.
Unfortunately, the Peninsula Case does
not –
•confirm whether or not the
reinstatement of a deregistered
company in terms of the New Act
will have retrospective effect; and
•clarify whether or not the CIPC has
powers or authority to declare that
assets of a deregistered company
will re-vest in a reinstated company
upon its reinstatement.
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Holes in the New Companies Act
CIPC Guidance on Reinstatement of Deregistered Companies
On 7 March 2012, the CIPC issued
Guidance Notice No. 3 of 2012 (issued
in terms of Regulation 4 of the New
Act) (“Guidance Note”), (headed
“RE-INSTATEMENT OF COMPANIES
AND CLOSE CORPORATIONS”).
The Guidance Note sought to clarify
the process of reinstatement of
companies and close corporations
deregistered in terms of the Old Act
due to failure to submit annual returns.
The Guidance Note is not very helpful
because it does not provide clear
guidance on practical issues relating
to reregistration of deregistered
companies. Further, the responses of
the CIPC to the reregistration request
made by PEC in the Peninsula Case
contradicted the provisions of the New
Act.3 This is a demonstration of the
depth of confusion within CIPC itself.
of deregistered companies in terms of
the New Act because it will result in
unnecessary litigation costs by affected
companies.
proceedings against a company or
close corporation (especially those
registered prior to 1 May 2011 (preexisting companies)), must first establish
whether or not those entities are still
registered.
Conclusion
Following the decision in the Peninsula
Case, CIPC must either revise the
Guidance Notice or issue a new
Guidance Note which will clarify issues
identified in the Peninsula Case. The
CIPC should take a lead in resolving the
uncertainty regarding the reinstatement
1
As a cautionary measure, persons who
are considering initiating litigation
V
alley View Homeowners’ Association v Universal Pulse Trading 27 (Pty) Ltd (70639/2010) [2011] ZAGPPHC 154 (13 May 2011) was the first case
to deal with the reregistration of deregistered companies in terms of the New Act, albeit not in similar detail as the Peninsula Case.
2
Interestingly, retrospectivity in respect of reregistration of deregistered companies is specifically catered for in the Australian and UK company
legislation. The wisdom of the drafters of the New Act in omitting the retrospectivity issue is therefore questionable.
3
S
ee Para. [8] and [19] of the Peninsula Case.
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