INTRODUCTION

Company de-registration poses a problem when it comes to the issue of immovable property.

When a company or close corporation (CC) is de-registered, it often occurs that the parties are unaware of this and enter into unenforceable agreements.

Lacking legal capacity, although still possessing property, these agreements are usually entered into in good faith, however, the company or CCs status makes the enforcement of these agreements challenging.

This article aims to address the legal position of these agreements, and how they may be validated.

WHY WOULD A COMPANY OR CC BE DE-REGISTERED?

According to section 82 of the Companies Act 71 of 2008 (the “Act”), a company or CC may be de-registered for a variety of reasons, such as failing to submit their annual returns for two or more years or appearing to have been inactive for at least seven (7) years and no person has demonstrated a reasonable interest in its continuance.

To determine the status of a company or close corporation, a CIPC search can be undertaken, and the status will either be reflected as “In Business” or “De-registration Process” or “De-registered”.

“De-registration Process” means that the company is still in business but is about to be de-registered. In such a case corrective action is needed to avoid final de-registration.

Once a company or CC has been de-registered, they no longer have a legal persona and are unable to trade, enter into agreements, take legal action against another party, or have any legal action taken against them.

EFFECT ON IMMOVABLE PROPERTY

It may occur that a company or CC is still in possession of immovable property after it has been de-registered. The legal position here is that all assets owned by the de-registered company or CC are transferred to the state as they are bona vacantia.

“Bona vacantia”, also known as “vacant goods” or “ownerless goods” in Latin, is a legal term for the situation in which property is left without any clear owner.

Therefore, a sale agreement entered into by a de-registered company or CC is unenforceable, however, it is possible to remedy this.

RE-REGISTRATION

According to section 82(4) of the Act, any interested party may apply to reinstate the company or CC, so long as they comply with all the necessary requirements. This will include written consent from both the Department of Treasury as well as the Department of Public Works.

There is a set and well known procedure for this. The procedure generally takes around 3 weeks.

Upon re-registration, any rights or liabilities the company or CC had prior to de-registration will be reinstated.

The Supreme Court of Appeal ruled in Kadoma Trading (Pty) Ltd v Noble Crest 3 All SA 126 (SCA) (28 March 2013) that, upon restoration in terms of section 82(4) of the Act, any acts performed by the company or CC during the period of de-registration will retroactively be validated as if de-registration had never occurred.

This means that a sale agreement for immovable property will be binding on all parties.

CONCLUSION

Although de-registration may delay the transfer of immovable property, it does not mean that the agreement cannot be cured by re-registration. Both the seller and buyer may be bound by the agreement, which can retrospectively be validated.

It is important for anyone transacting with a company or close corporation to verify the status of the entity, prior to entering into any agreement for immovable property.