What Is Deregistering A Company?
When closing a business/company, this means it’s ceasing to operate either due to:
- Deregistration or
- Liquidation.
What Is Deregistration Of A Business/Company?
When a business/company deregisters with the Companies and Intellectual Property Commission (CIPC), it implies the business/company is no longer registered and has no legal standing since it’s not doing any business nor has assets or liabilities.
What Is Liquidation?
When a business/company undergoes a voluntary or compulsory liquidation (also known as the “winding – up” of a business/company) it involves the process of selling all the assets, paying off creditors, issuing any remaining assets to the main or parent company, and then simply closing the business/company. Liquidation or the “winding –up” of a business/company may happen:
- When a business/company is unable to pay its debts
- As a result of a legal court process
- By application of the creditors
- Voluntary, i.e. applied for by members of a Close Corporation (CC)
- When the business owner decides to do something different, or even perhaps retires for a well-earned rest.
What Steps Should Be Followed When Closing A Business/Company?
Once a business/company receives confirmation from CIPC they have been deregistered, the registered representative should visit their nearest SARS branch and make sure the business or company is deregistered for all the various types of tax.
How To Deregister A Close Corporation In South Africa
If your company or close corporation ceases to operate, you may deregister it with the Companies and Intellectual Property Commission (CIPC). It can also be dissolved as result of liquidation.
- Deregistration implies that a business ceases to be registered as either a company or close corporation (no legal persona or standing) since it no longer is doing business and it has no outstanding assets or liabilities.
- Liquidation means that the business ceases to operate (generally as a result of financial problems). If your business has assets, liabilities or both, then you may have to follow the liquidation route.
Effect Of Deregistration
CIPC deregisters companies by removing their names from the Register of Companies. Once an entity is deregistered, it ceases to exist as a separate legal person.
As a result of the company ceasing to exist, all assets and property of the company, automatically and by operation of the law, are deemed to be bona vacantia (Latin, ownerless goods) and are vested in the State.
Directors, shareholders and members should be warned that deregistration does not affect their liability in respect of acts or omissions that took place before the company was removed from the register.
Where the company has outstanding debts, the debts are not extinguished by deregistration; the debts are, however, unenforceable against the company for such time as the company remains deregistered. A summons issued against a deregistered company is deemed a nullity; this can be particularly problematic when prescription of the debt owed by the deregistered company is considered.
It is submitted that the proper course of action in this regard, is for creditors to make application for reregistration before enforcing the debts against the company.
The situation regarding close corporations which are deregistered is different in that their members remain jointly and severally liable for the liabilities of the close corporation and creditors are able to bring claims directly against the members.
