South African business owners who haven’t kept up to date with their annual returns face losing their businesses… literally, writes Bakani Ngulani of BN Business Solutions.
The Companies and Intellectual Property Commission (CIPC) – formerly known as CIPRO – issued a notice on 12 December via their website that certain companies who had failed to submit annual returns to CIPC as is required by the Companies Act 71 of 2008 (the “Act”) would face deregistration on 2 February 2018. This applies across the board with regards to all entities registered with the CIPC be it private, external, incorporated or public companies as well as not for profit organisations and close corporations.
Though compliance is a cost to the business, non-compliance is costlier as it costs more to re-instate a company that to file the returns timely and several business opportunities may be lost due to non-compliance.
The annual returns process explained
On the anniversary of every company, it is required to file annual returns accompanied by annual financial statements to confirm that the entity is still conducting business and to ensure that the CIPC has the latest information of all registered entities in the nation. Annual returns are filed electronically through the user-friendly CIPC eServices website, where payment is deducted from a user’s preloaded account and proof of submission in the form of an annual returns certificate is emailed to the entity in question.
When annual returns are due, the CIPC sends out notices through the registered details be it SMS, email or registered address notifying the directors of their obligation to file annual returns. Should there be no response after two or more consecutive missed returns the CIPC proceeds to issue a notice of deregistration and the status of the entity then becomes “Deregistration process” giving the directors a chance to file outstanding returns. If this is not remedied the company is then placed under “AR Final Deregistered” meaning it has been struck off the register. Fortunately, recent changes in the CIPC issued company registration documents now reflect a status of the entity based on filling of the annual returns i.e. in business, deregistration process or AR final deregistration hence business owners may check by obtaining a disclosure certificate from the CIPC website. This status is also linked to the South African Revenue Authority (SARS) and the CSD hence affecting the overall entities compliance across all three.
The consequences of deregistration due to non-compliance.
The following are consequences of deregistration and affect both the entity and other entities it deals with; though the below is not exhaustive, it provides a preview of how serious this matter is.
- The entity becomes null and void as it can no longer trade with its name nor enter into legally binding business transactions.
- The name becomes available for use by anyone who may be interested in it.
- Its assets, movable and immovable, are forfeited to the State as bona vacantia assets.
- No legal action may be taken against deregistered firm by creditors hence it is advisable for entities to check the current status of other entities on the CIPC website before engaging them for business.
Is there life after death?
An entity deregistered due to non-compliance may be re-instated only if one or more of the following conditions are met as stated on the CIPC website:
- The company or close corporation was in business at the time of deregistration (Sufficient documentary evidence in the form of bank statements for a period of six months before and six months after deregistration are required).
- Immovable property is registered in the name of the deregistered business; or
- The court issued an order re-instating the company or close corporation.
In addition to meeting one of these conditions, supporting documents have to be submitted to support the re-instatement application. These can be found on the CIPC website and will be covered in a separate article.
What to do now?
Deregistration may come as a shock to many business owners as they may be sitting with company documents yet their company has been deregistered. The CIPC is obliged to notify entities of the above and has duly done so by communication through registered details and publishing a list of companies under through notices and gazettes. The sad reality is not many business owners are aware of their obligation mostly due to ignorance. Upon initial registration, the CIPC issues this information with the company registration document but filled with the excitement of owning a company people hardly read or remember this a year later. In some cases, people purchase shelf companies and don’t fully update the details or directors do not notify CIPC of changes in registered details hence the CIPC cannot get a hold of them.
The list of companies being deregistered on 2 February 2018 is currently available on the CIPC website. Though the CIPC has made an effort to categorize these entities as private, external, incorporated or public companies as well as not for profit organisations and close corporations the list is still quite cumbersome to go through as each section has up to 1100 pages. BN Business Solutions has taken it upon themselves to index these as a searchable online database to make the process easier for entrepreneurs by simply punching in the company name or registration number to check if the entity is being deregistered. Furthermore, there is a user-friendly one-click contact form to assist entrepreneurs generate a quote and proceed with the reinstatement of their business.
BN Business Solutions has taken it upon themselves to index the thousands of pages on the CIPC website as a searchable online database to make the process easier for entrepreneurs by simply punching in the company name or registration number to check if the entity is being deregistered.
Though compliance is a cost to the business, non-compliance is costlier as it costs more to re-instate a company that to file the returns timely and several business opportunities may be lost due to non-compliance. Find out if you are part of the list by visiting www.bnsolutions.co.za/check today and share this with a fellow business owner.
For any information on this subject matter contact BN Business Solutions on 0101402255 or email email@example.com.