Since the promulgation of the Companies Act 2008 (the Act), there has been a lack of clarity regarding the effect of the reinstatement of a deregistered company in terms of the Act. In particular, it was not certain whether the reinstatement of a deregistered company under the Act automatically retrospectively validates the corporate actions of the relevant company during deregistration, or whether a court order is required for these purposes. The different divisions of the High Court have made various decisions in this regard, ranging from total retrospectivity in some instances to partial retrospectivity and in certain instances no retrospectivity.
In Newlands Surgical Clinic (Pty) Ltd v Peninsula Eye Clinic (Pty) Ltd. 2015 (4) SA 34 (SCA), the Supreme Court of Appeals (SCA) considered the effects of reinstating a company under the Act.
A company would generally be deregistered after being wound up, or as a result of being liquidated, but may also be deregistered for failing to pay its annual returns to the Companies and Intellectual Property Commission (CIPC). The deregistration of a company puts an end to the existence of that company, and all subsequent actions purportedly taken on behalf of a deregistered company are consequently void and of no effect. The property of the deregistered company passes automatically to the State.
If a company is deregistered, an interested third party may apply to the CIPC for the reinstatement of that company in terms of section 82(4) of the Act.
In the Newlands Surgical Clinic case, Newlands Surgical Clinic (the Newlands Clinic) and Peninsula Eye Clinic (the Peninsula Clinic) were parties to arbitration proceedings, in terms of which an award was made in favour of the Peninsula Clinic. It subsequently came to the Peninsula Clinic's attention that the Newlands Clinic had been deregistered prior to the commencement of the arbitration proceedings. Accordingly, the arbitration proceedings and related court proceedings were invalidated by the deregistration of the Newlands Clinic.
The Peninsula Clinic made a successful application for the reinstatement of the Newlands Clinic in terms of the Act. However, it was not clear whether the successful reinstatement validated the arbitration proceedings and related court proceedings that took place during the period of deregistration.
Accordingly, the Peninsula Clinic applied to the High Court for an order declaring that the reinstatement of the Newlands Clinic by the CIPC operates retrospectively so as to validate actions performed on behalf of the company during its period of deregistration.
Findings of the SCA
The SCA found that the reinstatement of a company by the CIPC under the Act automatically validates all company actions with retrospective effect. Therefore, the arbitration proceedings and related court proceedings against Newlands Clinic during the period of deregistration, together with the awards and orders made under those proceedings, were automatically validated when Newlands Clinic was reinstated as a company.
The effect of this judgment is that third parties are not required to make an application to court for the retrospective validation of corporate actions by a company whilst such a company was deregistered.
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