The deregistration of companies in South Africa is not an unusual occurrence. Section 82 of the Companies Act, Act 71 of 2008 (hereinafter referred to as the “Act”), deals with the dissolution of companies and their removal from the register of companies. It may however happen that a company is deregistered while it is still in possession of fixed or moveable assets – what happens to these assets after deregistration?
In terms of Section 82 of the Act, the deregistration of a company comes into play in the following circumstances:
- The Commissioner of the Companies and Intellectual Property Commission (hereinafter referred to as “CIPC”) must remove a company’s name from the companies register after the affairs of such company have been completely wound up and after having received a certificate issued by the Master of the High Court to such effect;
- CIPC may remove a company from the companies register if the company has transferred its registration to a foreign jurisdiction;
- If a company has failed to file an annual return for two or more years in succession, CIPC may also remove a company from the register of companies if the company, on demand by CIPC, fails to give satisfactory reasons for the failure to file the required annual returns or, on demand of CIPC, fails to show satisfactory cause for the company to remain registered;
- If CIPC determines that a company appears to have been inactive for at least seven years, and no person has demonstrated a reasonable interest in, or reason for, its continued existence, the company may be removed from the companies register by CIPC;
- A company may also be removed from the companies register by CIPC after CIPC has received a request to such effect, and after having determined that the company has ceased to carry on business and has no assets or, due to the inadequacy of its assets, there is no reasonable probability of the company being liquidated.
When a company has been deregistered and its name has been removed from the register of companies, Section 83 of the Act states that the company is dissolved as from the date on which its name is removed from the companies register. This means that the legal persona of the company ceases to exist. The company will therefore no longer be able to trade, do business, enter into agreements and will not be able to take any legal action against any other party, nor will any other party be able to take any legal action against the company.
In certain instances, it may happen that a company is deregistered while it is still in possession of fixed or moveable assets. After the deregistration of a company, any and all assets that it may have owned immediately prior to its deregistration, passes to the state as bona vacantia (loosely meaning property without an owner or ownerless property).
The broad principle of bona vacantia being the property of the state, has its origins in Roman law, specifically in the context of intestate succession where no intestate heirs exist. Similarly, in English law, assets of a person that dies intestate without any intestate heirs, passes to the Crown.
In English law the situation regarding bona vacantia in the case of intestate succession as mentioned above, is similar to the case where a company dissolves while it still has assets. The assets of a dissolved company passes to the Crown. This position has even been consistently captured in English legislation (Section 296 of the Companies Act 1929, Section 354 of the Companies Act 1948, Section 654 of the Companies Act 1985 and Section 1012 of the Companies Act 2006).
In South Africa, neither the Companies Act, Act 61 of 1973, nor the Companies Act of 2008, contains any provisions that are similar to that contained in the English legislation mentioned above.
Assets of a deregistered company passing to the state as bona vacantia in the South African context was however imported from English law and firmly established in our law through a string of court cases throughout the years:
- In Ex parte Sprawson (In re Hebron Diamond Mining Syndicate Ltd ) 1914 TPD 458 as well as Ex parte The Government 1914 TPD 596, the position was confirmed. Certain principles laid down in the Sprawson case mentioned above were followed in later cases such as Re Jacobsons Ltd 1927 TPD 857, Ex parte Liquidators Lime Products (Pty ) 1942 CPD 402, Ex parte Minister of Irrigation 1948 (2) SA 779 (K), Ex parte Pillay & Sons Ltd 1951 (1) SA 229 (T), Norton District Tobacco Warehouse (Pvt) Ltd v Skea 1963 (1) SA 856 (FC), Ex parte Marchini 1964 (1) SA 147 (T) and Ex parte Minister of Lands; Ex parte Ventersdorp Muslim B Trust (Pty) Ltd and Others 1964 (3) SA 469 (T).
- The position was then again confirmed in more recent cases such as Rainbow Diamonds (Edms) Bpk en Andere v Suid-Afrikaanse Nasionale Lewensassuransiemaatskappy 1984(3) SA 1 (A), Newlands Surgical Clinic (Pty) Ltd and Peninsula Eye Clinic (Pty) Ltd and Others 2014(1) SA 381 (WCC) and Body Corporate Georgian Terrace v Sananga Business Enterprise CC and Others (69125/2014)  ZAGPPHC 626 (21 August 2015).
Written by: L Theron (B.com Law, LL.B, Dipl. Fin. Plan)