Why Thousands of South African Companies Are Being Deregistered—and how to keep your business safe.
Running a company comes with responsibilities, and failing to meet them can have serious consequences.
Recently, the Companies and Intellectual Property Commission (CIPC) in South Africa has deregistered a significant number of companies and close corporations.
If you're a business owner, this is something you can’t afford to ignore.
Why Are Companies Being Deregistered?
The CIPC is enforcing compliance with the Companies Act, and deregistrations happen when companies or close corporations fail to meet their legal obligations.
These are the main reasons why businesses are being deregistered:
1. Failure to File Annual Returns (AR)
Companies are required to file ARs to confirm they’re still operational. Missing this step signals inactivity, which leads to deregistration.
2. Non-Submission of Beneficial Ownership (BO) Declarations:
BO declarations ensure transparency by identifying the individuals who own or control a company. Not submitting this is a red flag for non-compliance.
3. Inactivity Over Time:
Businesses that haven’t shown signs of activity or economic value over an extended period are considered dormant and risk deregistration.
4. Other Non-Compliance with the Companies Act:
This includes failure to keep records, file financial statements, or meet other statutory obligations.
What Happens When a Company Is Deregistered?
Deregistration isn’t just a technicality—it can have serious consequences for business owners and their operations:
Directors May Be Personally Liable:
Once a company is deregistered, directors can no longer hide behind limited liability. This means they may become personally responsible for any debts the company owes.
Bank Accounts May Be Frozen:
A deregistered company’s bank account can be frozen, making it impossible to access funds or complete transactions.
Service Providers May Refuse to Deliver Services:
Suppliers and service providers may refuse to work with a company that is no longer legally registered, disrupting operations.
Creditors May Refuse to Pay:
Creditors are unlikely to settle invoices for a deregistered company, as it’s technically no
Can a Deregistered Company Be Reinstated?
The good news is that reinstatement is possible in some cases, but it requires evidence that the company was economically active or valuable at the time of deregistration.
Here’s how it works:
1. Provide Proof of Economic Activity:
You’ll need to show documentation (e.g., financial records, contracts, or other evidence) proving the company was operational before deregistration.
2. Apply for Reinstatement:
Submit the necessary forms and supporting documents to the CIPC. This process can be complex, so consulting with a legal or compliance expert is recommended.
How to Avoid Deregistration in the First Place
Prevention is better than cure. Here’s what you can do to stay compliant and keep your company active:
1. File Annual Returns On Time:
Set reminders to file your AR every year. This is a simple process that confirms your company is still operational.
2. Submit Beneficial Ownership Declarations:
Keep track of BO declaration deadlines to ensure transparency and compliance.
3. Maintain Proper Records:
Ensure you’re keeping all required records, such as financial statements, tax filings, and shareholder agreements.
4. Stay Informed:
Regularly check for updates from the CIPC to ensure you’re aware of any changes to compliance requirements.
5. Consult Professionals:
If you’re unsure about your obligations, work with a legal or business consultant to avoid costly mistakes.
Take action before it’s too late
Deregistration can be a costly and disruptive experience for any business.
Whether you’re running a thriving company or a small close corporation, staying compliant with the Companies Act is crucial for your business's success.
If your company has been deregistered, don’t panic—reinstatement is possible, but it’s best to act quickly. And if you’re still in good standing, make compliance a priority to ensure smooth operations moving forward.
You’ve got this, and we’ve got you – feel free to reach out to our support team if you have any questions or concerns!