FILTERS:

Unregistered foreign companies

22 September 2011

 

It is essential to distinguish between ‘foreign company’ and an ‘external company’. A ‘foreign company’ simply means an entity incorporated in some other jurisdiction outside the Republic of South Africa. This is irrespective of whether it is a profit or a non-profit entity, and irrespective of whether it carries on its business or non-profit activities within South Africa. Where a foreign company, however, carries on business or non-profit activities (as the case may be) within South Africa, it then qualifies as an ‘external company’ that may possibly need to be registered as such under the Companies Act, 2008.

An external company is a subcategory of a foreign company. The importance of the distinction is that it is only external companies (but not other foreign companies) that are specifically required to register with the Companies Commission, and to observe those provisions of the Act that apply to external companies. The question that arises is when is a foreign company ‘conducting business or non-profit activities (as the case may be) within the Republic of South Africa’?

Section 23 of the Act provides that a foreign company must be regarded as ‘conducting business, or non-profit activities, as the case may be, within the Republic if that foreign company –

              (a)          is a party to one or more employment contracts within the Republic; or

              (b)          subject to subsection (2A), is engaging in a course of conduct, or has engaged in a course or pattern of activities within the Republic over a period of at least six months, such as would lead a person to reasonably conclude that the company intended to continually engage in business or non-profit activities within the Republic.

Subsection (2A) significantly states that a foreign company must not be regarded as ‘conducting business activities, or non-profit activities, as the case may be, within the Republic’solely on the ground that the foreign company is or has engaged in one or more of the activities set out in section 23(2)(a)-(f) of the Act.

 Should a foreign company not be registered as an external company in South Africa, and acquires immovable property or real rights in immovable property in South Africa, the question arises as to whether the Conveyancer or Registrar of Deeds assumes the responsibility that such transaction entered into by the company, is authorized by and in accordance with the constitution, or founding statement of such company. Regulation 44A(d)(ii)(bb) of the Deeds Registries Act 47 of 1937 excludes a company, except a share block company as defined in the Share Blocks Control Act 59 of 1980.

 Similarly, regulation 44A(d)(ii)(aa) places the responsibility on the conveyancer for the appointment of the directors of the company.

Under the repealed Companies Act 61 of 1973, foreign companies were registered as external companies (see section 322). However, from what has been alluded to above it is clear that there may be instances where acts of registration could occur in a deeds registry by a foreign company without such company being registered as an external company. Should this be the case, the question arises as to whether the conveyancer still assumes the responsibility, as set out in Regulation 44A(d)(ii)(aa) and (bb) or does that responsibility now devolve upon the Registrar of Deeds.

It is submitted that “company” should be given its literal meaning, and thus it can only mean a company as envisaged in the previous Companies Act. For this reason it is submitted that any foreign company being a party to an act of registration to be registered in a deeds registry will have to lodge with the registrar of deeds the following:

  • Its constitution or founding statement.
  • Proof of appointment of Directors.
  • Resolutions taken by Directors.

Readers’ views on this matter will be appreciated -Editor

 

 

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