Interesting changes to the new companies act

The New Companies Act which came into force on 1 May 2011 has introduced some interesting changes, one of which concerns the sale by a company of the whole or a major portion of its assets.

The previous Companies Act required a special resolution by the shareholders which had to be registered with the Companies Office within 6 months of its passing, failing which it would be invalid.

The New Companies Act still requires the passing of a special resolution by the shareholders, but does not require it to be registered or filed with the Companies and Intellectual Property Commission for it to be valid.

The Companies and Intellectual Property Commission (CIPC), previously known as CIPRO, have recently confirmed that more than one million companies and close corporations have lately been either deregistered or are in the process of deregistration due to their failure to submit their annual returns.

The legal consequences of deregistration are severe: companies and close corporations lose their status as legal entities, their assets pass to the State and agreements concluded with them may be negatively affected. For example, should such an entity be the owner of immovable property, it would not be possible for it to sell or pass transfer of this property. 

 The good news is that the new Companies Act (section 82(4) read with Schedule 3, Part 8) provides that application can be made to reinstate the registration of both a company and close corporation if it was deregistered as a result of non-filing of annual returns.  Such a reinstatement will have the effect of reviving the company or close corporation’s rights and obligations.

However, when such an entity is the owner of immovable property, additional requirements are laid down: the written consent of both the Departments of Treasury and Public Works are to be obtained prior to lodging the application.
Since the process of transfer of any property owned or purchased by such entities are effectively stayed until such entity is reregistered, significant delays are to be expected when a deregistered entity is involved.

You would therefore be well advised to verify the status of your Company or Close Corporation with CIPC, as well as that of any entity you intend to transact with prior to entering into a contract for the sale of immovable property.