It frequently occurs that a practitioner is confronted with a situation where a company or close corporation is deregistered or dissolved and removed from the register. This causes major problems, from a conveyancing perspective, should such company or close corporation be the owner of immovable property, be a bondholder or the holder of a real right in immovable property, and an act of registration must be effected in respect of such property.
From the outset one must clearly distinguish between deregistration and dissolution, as there is a clear distinction between the two, which is not always clear from the legislation.
While both have the effect of terminating the legal existence of a company or close corporation, their purpose and some of their consequences are different. Upon the dissolution of a company the liability of its directors, officers and members ceases, whereas this is not the case with deregistration. Furthermore, the effect of declaring a dissolution void is not retrospective, but when the registration of a deregistered company is restored, the company's rights and obligations, prior to deregistration, revive and the order declaring the deregistration void operates retrospectively. This was specifically spelled out in section 73(6) of the Companies Act 61 of 1973. No similar provision is contained in the new Companies Act 71 of 2008.
Deregistration of companies and close corporations
In addition to the duty to deregister a company, the Companies Commission may otherwise remove a company from the companies register in the following circumstances:
If the Companies Commission deregisters a company, any interested person may apply in the prescribed manner to the commission to reinstate the registration of company. The court also has the power to restore the company's registration.
Effect of deregistration on conveyancing transactions
It is incumbent on the conveyancer to determine whether the company or close corporation has been deregistered or not. Should it be found that it has been deregistered, such company or close corporation must firstly apply for reinstating of the registration. This can be effected in the form of an application or by order of court, before any transaction can be proceeded with, in respect of assets registered in it's name.
Effect of dissolution of a company or close corporation
In 1964 at the Annual Conference of Registrars, they were confronted with the following scenario:
"Where a company has been struck off the roll, can a messenger or sheriff give transfer to a purchase at a sale in execution of property registered in the company's name? Attention is invited to the decided case SA Permanent Building Society v Levy 1959 1 SA 228 T, which declared that the sheriff, for instance, acts as a statutory agent on behalf of the judgment debtor."
The Registrars resolved that where a company has been dissolved after having been wound up, it can be restored to the register of companies within two years of dissolution (see RCR 23 of 1964).
At any time after a company has been dissolved:
The court thus has the power upon application by the liquidator or other interested party to set aside a dissolution in terms of a voiding order. The purpose of setting aside a dissolution is usually to complete unfinished business or to rectify an oversight in relation to a winding-up, such as the distribution of one or more of the Company's assets that had been overlooked in the final process. Note that in these circumstances the institution of proceedings against the company can proceed as if the company had not been dissolved.
However, where assets of a company are not transferred prior to its final dissolution and no application as referred to supra, is bought, such assets accrue to the State as bona vacantia without further ado (See ,Rainbow Diamonds (Edms) Bpk en Andere v Suid-Afrikaanse Nasionale Lewensassuransiemaatskappy 1984 (3) SA 1 (A). Although the aforesaid case referred to movable assets, the same principle applies to immovable property (see Ex parte The Government 1914 TPD 596). In the latter case the court had to decide about a farm which was registered in the name of a company which had been dissolved. It was held that the State is entitled to property to which no one else can establish a title or is likely to establish a title.
The question petitioning for an answer is who can deal with the movable or immovable property that has been declared bona vacantia, for example where a company has been finally dissolved and it is found that the said company is a bondholder of a bond registered over land, or that immovable property belonging to the dissolved company must be transferred to someone who is lawfully entitled to it. The judge in the Rainbow- case held that the Treasury has the power to waive the right of the State in favour of the rightful claimant, and thus has the power to consent to the cancellation of the bond or the transfer of the immovable property into the name of the person(s) entitled thereto.