The volatile economic climate in South Africa has left companies with no alternative but to consider either voluntary liquidation or voluntary deregistration of a company when there is no further prospects of trading and business rescue is not a viable option.
VOLUNTARY DEREGISTRATION
When there is no intention to resume trading in a company, the Companies Act, 71 of 2008, provides for instances when a company may be deregistered. In practice the two most frequent instances of deregistration are either by voluntary application or by failure to pay annual returns whereby a company is placed in “AR final deregistration”.
In terms of Section 82(b)(ii) of the Companies Act 71 of 2008 a company that has ceased to carry on business, has no assets or, because of the inadequacy of its assets, there is no reasonable probability of the company being liquidated, a company may on application to CIPC in the prescribed manner and forms apply for the company to be deregistered.
An application for voluntary deregistration is a fairly uncomplicated process when assisted by an experienced attorney to formally cease trading of a company and ultimately have the company removed from the companies register.
Application requirement for voluntary deregistration:
An application must be submitted to CIPC in order to successfully proceed with a voluntary deregistration. The following documents needed are to proceed with the voluntary deregistration:
- Tax clearance certificates (as proof that no returns are outstanding);
- Copy of Identity Documents of the representative of the company;
- Completed application form.
The documents will be submitted to CIPC and notification will be send to inform the relevant parties that the company has been deregistered and removed from the companies register.
Effect of the deregistration
Upon deregistration a company’s ability to trade ceases and it no longer has the juristic capacity to be a party in litigation proceedings. This effectively means that a deregistered company may not proceed with any litigation against a debtor and in return creditor cannot proceed with further litigation against the deregistered company.
If the commission deregisters a company, any party may apply in the prescribed manner and form to the commission to reinstate the deregistered company or may way of court application apply to have the company reinstated.
Practically it is very difficult for a third party and or creditor to apply to have a company reinstated by CIPC. The reason for the above-mentioned statement is that the required documents to proceed with such an application will not ordinarily be in the possession of the third party and or creditor.
The removal of a company’s name from the companies register does not affect the liability of any former director or shareholder of the company or any other person in respect of any act or omission that took place before the company was removed from the register.
Any liability continues and may be enforced as if the company had not been removed from the register.
If the commission deregisters a company as contemplated in subsection (3), any party may apply in the prescribed manner and form to the commission to reinstate the registration of the company.
VOLUNTARY LIQUIDATION
When considering voluntary liquidation or voluntary deregistration of a company, the prevailing consideration will be if a company’s owns assets and whether or not the company has liabilities.
The process to apply to have the company placed in voluntary liquidation can be done by submitting a special resolution together with the required documents to CIPC, alternatively by way of a court application.
After a company has been placed in voluntary liquidation by the CIPC, a liquidator is appointed by the Master of the High Court. The liquidator will then proceed with the administrative duties in order to finally wind up the company.
The administrative duties will typically include the realizing of assets, approval of claims submitted, drafting of liquidation and distributions accounts and proceedings with dividend payments (if any) to creditors.
The effect of liquidation
The appointed liquidator has the authority to proceed with litigation on behalf of the liquidated company or a creditor may, after the required notice to the liquidator proceed with litigation against the company in liquidation.
It is vital to consult legal experts when considering either the voluntary deregistration or voluntary liquidation process. The appropriate process would be determined by the specific facts, financial position and other circumstances of the company after consultation with an expert attorney.
By Eloise Cilliers | Senior Associate at Barnard
