The Companies and Intellectual Properties Office deregistered
over one million companies and close corporations for failing to
submit annual returns in the twelve months prior to the Companies
Act, 2008 (the new act) coming into force. Many of these were still
trading. Some were restored to the relevant registers prior to the
new act coming into force. Many were not, even though their owners
continued to run them as if they were still in existence. Some of
these have been reinstated to the register in terms of the new
The legality of these deregistrations has been questioned. That
is not the focus of this article. The purpose of this article is to
consider the effect of the deregistration of a company or close
corporation arising from a failure to file an annual return and the
consequence of a subsequent reinstatement to the register under the
Deregistration brings an entity to an end. It ceases to exist.
Its property, if any, vests in the state as bona vacantia. Section
83(1) of the new act states that a deregistered company (and thus a
close corporation as well) must be treated on the same basis as an
entity whose winding up is complete. The entity is thus dissolved.
Dissolution is the final step that consigns a juristic personality
to oblivion. All rights and obligations which once vested in the
entity are brought to an end. They do not exist in limbo, awaiting
a possible restoration, as was the case prior to the new act coming
Oblivion has important consequences. Everything ends. Contacts
are terminated. Relationships, including employment relationships,
cease to exist. Litigation stops. The entity is wiped from
existence. All that is left apart from the vesting of property in
the state are the rights and obligations described in Section 83 of
the new act. These are:
The obligations of any person for acts or omissions committed
prior to deregistration remain in force as does any liability that
flows from this.
The right of any person who has an interest in the entity to
apply to court for an order declaring the dissolution void or such
other equitable relief that may be appropriate.
One does not have to apply to court to resurrect an entity. An
interested party may apply to the Companies and Intellectual
Properties Commission (CIPC) to restore the entity to the register.
This has the effect of restoring to it the property that vested in
the state. It does not in my opinion, as was the case prior to the
new act coming into force, operate retrospectively. The restoration
takes place with effect from the date it is granted.
The entity is reborn, but save for property, is shorn of its
previous life. It is not, as was the case in the past, reinstated
to the register as if the entity had never been deregistered.
Restoration does not bring the contracts and other relationships
that were terminated on deregistration back to life.
This can have serious consequences for the entity and for those
with whom the entity deals. In many cases the full impact of those
consequences may be mitigated by the parties' conduct.
Contracts and other relationships that were terminated by
deregistration may be restored as a result of that conduct. It may
be possible in other instances to retrieve what was lost. Income
tax and VAT registrations may, for example be reinstated as may
domain names and other accounts. For many ignorance of the fact of
deregistration may make this a fait accompli. However
there will also be issues that cannot be resolved. Some could
suffer serious and irreparable prejudice as a result of
The remedy in these cases is to be found in Section 83 of the
new act and the power the court enjoys to declare deregistration
void or grant other equitable relief. It will be interesting to see
how our courts exercise this right. These orders will not be easy
to obtain. All interested parties must be notified of the
application. This will include those with whom the entity
transacted. Competing interests will need to be weighed up. My
sense is that the time elapsed after deregistration will be an
important factor in deciding these matters as will the risk of
prejudice to third parties. I do not think that our courts will be
sympathetic to those who seek to use deregistration to avoid their
obligations. The courts should respond favourably to the entreaties
of parties who have acted on the basis that the entity has been
The legal status of the entity's transactions during the
hiatus caused by deregistration is will give rise to a considerable
amount of uncertainty. The risk that owners and managers will incur
personal liability during this time will be very considerable.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
In our article " Characteristics of the Commercial Agency Law of the United Arab Emirates" published with Mondaq on 27.09.2016, we outlined the general applicability of the UAE Commercial Agency Law (Federal Law No. 18 of 1981 including its amendments).
Ministerial Decision No. 124/2016 came into force on 27 April 2016 and, in summary, prohibits the registration of company names that are a proper noun or the collective name of a tribe with the letters "Al" preceding it...
It is without doubt that in-house collection offers some advantages because it can move swiftly to recover small debts.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).