The latest Company and Intellectual Property Registration Office (CIPRO) report confirms that 760 000 companies and close corporations were deregistered in July, and this has serious legal consequences for those who have lease agreements with these businesses.

All registered businesses are required to submit annual returns to CIPRO confirm they are still in business and maintain up-to-date records. If businesses fail to lodge and pay for their CIPRO annual returns for more than six months, CIPRO may conclude the companies or close corporations are no longer in business and will start the process of deregistering them.

The terms and conditions of the lease with a close corporation will still be enforceable as against the members of a close corporation but will be unenforceable against the occupying company or its directors, officers, members while they are deregistered, although the liability of and members of close corporations sureties will remain,” says Michelle Dickens, managing director of TPN, South Africa’s only specialist property credit bureau and developer of the industry’s first rental payment profile of its kind.

“It is essential that all landlords and property managers check the legal status of their corporate tenants. If you have tenants that have been deregistered you should seek legal advice without delay.”

Marlon Shevelew, chief attorney at Marlon Shevelew and Associates says the Close Corporations Act and Companies Act have different consequences of deregistration for companies and close corporations. The opportunity for re-registration does exist, but there are differences depending if you are a close corporation or a company.”

In the case of close corporations, he says deregistration does not end existence of the corporation but it does means the loss, by the association of members forming the corporation, of legal personality and corporate status.

The members of the corporation at the time of deregistration are jointly and severally liable for such liabilities and will be held accountable for lease obligations

“The registrar may restore registration on application by any interested person (including creditors and therefore landlords), and if satisfied that a corporation was at the time of its deregistration carrying on business or was in operation or that it is otherwise just that the registration of the corporation be restored, provided that the returns have been lodged.

“The registrar must then publish notice of the restoration in the Government Gazette, and the corporation will, from date of publication, be deemed to have continued in existence from the date of deregistration, as if it were not deregistered and all obligations or rights under a lease will be resuscitated.”

He says in the case of companies, deregistration brings about a formal end to the company which is then considered defunct.

The debts due by a company, such as rentals, are not extinguished but are rendered unenforceable while the company is deregistered.

However, the liability (if any) of directors, officers, members and sureties of the company continues, and may be enforced as if the company had not been deregistered.

A judgment against a company after it’s deregistration is a nullity and all property, movable and immovable, corporeal and incorporeal, passes automatically, without any necessity for delivery or any order of court, into ownership of the State.

A person who purports to contract in the name of a company that has been deregistered, where both he and the person with whom he transacts believe the company to be still in existence, does not incur personal liability on the contract and the contract is a nullity.

A written application may be made to the registrar who may then restore the business. In these cases the landlord can apply to court for the company’s restoration to the register.

The effect of such an order is that the company is deemed to have continued operation as if it had not been deregistered. This means all actions and agreements done and made in the name of the company during the period between its deregistration and its restoration will be upheld.