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[2013] ZAKZPHC 31
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Nulandis (Pty) Ltd v Minister of Finance and Others (10760/12) [2013] ZAKZPHC 31; 2013 (5) SA 294 (KZP) (24 May 2013)
IN
THE KWAZULU-NATAL HIGH COURT,
PIETERMARITZBURG
REPUBLIC OF SOUTH AFRICA
CASE
NO: 10760/12
In
the matter of:
NULANDIS
(PTY) LIMITED APPLICANT
and
THE
NATIONAL MINISTER OF FINANCE FIRST RESPONDENT
THE
COMPANIES AND INTELLECTUAL
PROPERTY
COMMISSIONER
SECOND
RESPONDENT
JUDGMENT
Date
of hearing: 20 February 2013
Date
judgment delivered: 24 May 2013
D.
PILLAY J
Introduction
[1] The
applicant, Nulandis (Pty) Ltd, formerly known as Plaaskem (Pty) Ltd,
seeks an order confirming that the registration of
Greenacres
Management Services (Pty) Ltd (Greenacres), previously known as
Brangus Ranchina (Pty) Ltd, is restored to the companies
register in
terms of section 83(4)(a) of the Companies Act 71 of 2008 (the new
Act). It also asks for confirmation that the assets
of Greenacres be
declared not to be
bona
vacantia
to the state.
[2]
The background to this application is that Nulandis obtained judgment
against Greenacres for R369 328.25 plus interest and costs.
Without
paying Nulandis’ claim Greenacres was deregistered for failing
to render annual returns. In this application
Nulandis
wants to recover payment. It assumes that in order to do so it has to
restore Greenacres to the companies register.
[3]
The Minister of Finance, the first respondent abides by the decision
of the court. The second respondent, the Companies and
Intellectual
Property Commissioner (the Commissioner) has not responded to the
application. Although the application was returned
with a non-service
on the Commissioner because the state attorney had no mandate to
accept service, the rule
nisi
was served on the Commissioner’s officials. Such service plus
the publication of the rule
nisi
in the
Witness
and Government Gazette is sufficient notice to the Commissioner to
join the proceedings.
1
[4]
Gary Patrick Porrit, a former director, shareholder and beneficiary
of Greenacres responded to the rule
nisi
served on Greenacres at its business address. In his affidavit he
protests that Nulandis has not cited Greenacres in this application,
that based on s 82(3) of the new Act as applied in
ABSA
Bank Ltd v Companies and Intellectual Property Commissioner and
Others; ABSA Bank Ltd v Voigro Investment
19CC (8250/12, 6601/12)
[2012] ZAWCHC 182
and
Peninsula
Eye Clinic (Pty) Ltd v Newlands Surgical Clinic (Pty) Ltd and Others
2012 (4) SA 484
(WCC)
([2012]
3 ALL SA 183
(WCC)) the court has no powers to restore the
registration of Greenacres. In any event no assets vested in the
state on deregistration
allegedly because none existed. He does not
oppose the application.
[5]
As Greenacres does not exist as a company and has no legal standing,
Nulandis could obviously not litigate against it. Whether
there are
assets is a matter for Nulandis to pursue. I doubt that it would
trouble itself to launch this costly litigation if it
had nothing to
gain from it. Besides, Mr Porrit alleged that ‘the ultimate
shareholder’ of Greenacres was a trust of
which he was a
beneficiary. That trust, once identified, might throw some light on
the assets of Greenacres in due course. The
rest of this judgment
discusses the point of law Mr Porrit and Mr R M van Rooyen, counsel
for Nulandis raise.
[6]
The technical nature of the topic and the inter-connectedness of the
provisions I am about to discuss lend themselves unavoidably
to
repetition for the sake of clarity. The resulting turgidity is
regretted.
[7]
Nulandis relies on s 83(4). Section 83(4) does not provide for the
restoration of a company on the companies register. It enables
a
court to void dissolution of a company in the following terms:
‘
(4)
At any time after a company has been dissolved-
(a)
the liquidator of the company, or other person with an interest in
the company, may apply to a court for an order declaring
the
dissolution to have been void, or any other order that is just and
equitable in the circumstances; and
(b)
if the court declares the dissolution to have been void, any
proceedings may be taken against the company as might have been
taken
if the company had not been dissolved.’
[8]
What Nulandis actually seeks is to avoid the dissolution of
Greenacres. At the outset therefore the distinction between
deregistration
and dissolution must be clarified. For reasons that
will emerge below it is also necessary to compare their treatments
under the
Companies Act 61 of 1973 (the old Act) and new Act.
The
old Act
[9]
The old Act de-linked deregistration from dissolution. Citing
Henochsberg
on the old Act (issue 32) and other authorities,
ABSA
Bank
para 38-39 distinguishes, correctly with respect, between restoring
registration in terms of s 73(6)(a) and voiding dissolution
in terms
of s 420 following a winding up in terms of s 419 of the old Act.
Deregistration terminated the legal status of the company.
Dissolution by
winding
up and liquidation terminated the company.
2
After deregistration and before dissolution the company existed as an
association of members who remained
personally
liable for its debts.
3
Its assets vested automatically in the state represented by the
Minister of Finance.
[10]
Section 420 of the old Act gave the court wide powers in the
following terms to void dissolution:
‘
Court
may declare dissolution void.— When a company has been
dissolved, the Court may at any time on an application by the
liquidator of the company, or by any other person who appears to the
Court to have an interest, make an order, upon such terms
as the
Court thinks fit, declaring the dissolution to have been void, and
thereupon any proceedings may be taken against the company
as might
have been taken if the company had not been dissolved.’
[11
] Located in the chapter titled ‘Winding up of Companies’
avoiding dissolution in s 420 was triggered by either
one of the
following events:
(a)
voluntary winding up by the company or by creditors; or
(b)
winding up and liquidation by court order.
[12]
Restoring the registration of a company deregistered for failing to
render annual returns was regulated under s 73 of the old
Act which
fell under the chapter titled ‘Formation, Objects, Capacity,
Powers, Names, Registration And Incorporation Of Companies,
Matters
Incidental Thereto and Deregistration’. Section 73(6) of the
old Act also gave the courts wide powers in the following
terms to
restore registration:
‘
(a)
The Court may, on application by any interested person or the
Registrar, if it is satisfied that a company was at the time of
its
deregistration carrying on business or was in operation, or otherwise
that it is just that the registration of the company
be restored,
make an order that the said registration be restored accordingly, and
thereupon the company shall be deemed to have
continued in existence
as if it had not been deregistered.
(b)
Any such order may contain such directions and make such provision as
to the Court seems just for placing the company and all
other persons
in the position, as nearly as may be, as if the company had not been
deregistered.’
[13]
Whereas the court could restore a company to the register on any
grounds as long as it was just, the Registrar, the predecessor
of the
Commissioner, could only restore a company administratively i.e. if
the company that had been deregistered for not lodging
annual
returns, had since lodged them.
4
Practically, if an administrative reinstatement was sought the
Registrar would have been the first port of call. If that failed,
then the court could be approached either in terms of s 73(6) or, at
worst, on review. A criterion decisive for restoring to the
register,
whether by the Registrar or the court, was that at the time of its
deregistration the company was carrying on business
or was in
operation. Under the old Act and, as will be seen, in terms of s 82
(3) , regulation 40 and Practice Note 6 of 2012 issued
under the new
Act, the emphasis on this criterion for the administration of the
companies register cannot be missed.
[14]
Manifestly, the old Act distinguished clearly between, on the one
hand, dissolution and when and how it could be avoided and,
on the
other hand, deregistration and when and how a company could be
restored to the register. Although the circumstances that
triggered
both applications and the requirements to succeed differed, both
applications could be made to the court. For both applications
the
old Act gave the court wide discretion.
[15]
The consequence of a restoration application was to restore the
status
ante
quo.
Restoration automatically voided dissolution. By statute, the company
was
‘deemed
to have continued in existence as if it had not been deregistered’.
5
[16]
In contrast, the consequence of voiding dissolution was open to
interpretation. Voiding dissolution did not automatically restore
registration. However, s 420 empowered the court with the flexibility
‘to make an order, upon such terms as the Court thinks
fit.’
It also permitted ‘any proceedings [to] be taken against the
company as might have been taken if the company
had not been
dissolved.’ These provisions coupled with s 73(6) and 6 (A)
enabled the court, when exercising its discretion
under s 420, to
direct the Registrar to restore the registration. In granting a s 420
application in order for a liquidator to
be reappointed, the court in
Ex
Parte Bowman: In Re International Rock Products (Pty) Ltd
[1985] 3 All SA 123
(W)
(1985 (1) SA 70
(W)) at 125 observed:
‘
It
seems to me that the power to make an order upon such terms as the
Court thinks fit is related specifically to the power to declare
the
dissolution void and to revive the company, and is not a general
power.’
6
And
‘
The
company is to be brought back to life for a very limited purpose
only. There is no question of trading, and there is no question
of
enjoying any of the other rights of a company on the register.’
7
Significantly
the court did not restore the company to the register but ordered:
‘
The
dissolution of the company is declared to have been void and the
company in liquidation is revived.’
8
If
by ‘revived’ the court meant ‘restored on the
register’, the court would have so ordered, given that
restoration or reinstatement is a distinct juridical act, which
practically, would have had to be effected by the Registrar.
[17]
The authorities differed on the retrospective effect of s 420.
9
However, that is not a debate pertinent to the decision in this case.
The
new Act
[18]
Turning to the new Act, its Explanatory Memorandum, 2007 states its
aim as not to:
'unreasonably
[jettison] the body of jurisprudence built up over more than a
century
[but]
to ensure that the new legislation is appropriate to the legal,
economic and
social
context of South Africa as a constitutional democracy and open
economy.
Where
current law meets these objectives, it should remain as part of
company law.’
10
[19]
Consistent with this aim dissolution was conceived as being triggered
in the same way as in the old Act i.e. by winding up
and liquidation.
11
However,
between 2007 when the Explanatory Memorandum was published and 2008
when the new Act was promulgated, this conception under
the old Act
was jettisoned.
[20]
The new Act differs materially from the old Act. Firstly,
deregistration and dissolution of companies are conflated in ss 82
and 83(1) of the new Act. Section 82(2) requires the Commission, on
receiving a certificate of winding up of a company to record
the
dissolution of the company and remove the company’s name from
the companies register. This section anticipates dissolution
followed
by deregistration as the natural consequences of a company being
wound up.
[21]
More pertinently for this application, s 82(3) empowers the
Commission to remove a company from the companies register if the
company has failed to file an annual return for two or more years in
succession. This section does not anticipate dissolution as
an
automatic consequence of deregistration. But s 83(1) does.
[22]
Section 83(1) unequivocally conflates deregistration with dissolution
of a company in providing as follows:
‘
Effect
of removal of company from register.—(1) A company is dissolved
as of the date its name is removed from the companies
register unless
the reason for the removal is that the company’s registration
has been transferred to a foreign jurisdiction,
as contemplated in
section 82(5).
’
Prior
to its amendment'
12
as recently as 19 April 2011, s 83(1) read as follows:
‘
A
company is dissolved as of the date its name is removed from the
companies register.’
The
qualification that came with the amendment confirms that conceptually
the new Act delinks deregistration from dissolution. A
deregistered
but not dissolved company can exist in order to be transferred to a
foreign jurisdiction.
[23]
Even though the legislature reconsidered s 83(1) three years after
its initial promulgation, albeit for the purpose of the
qualification, it persisted with conflating deregistration of a
company with its dissolution. Although conceptually distinct,
deregistration is fused with dissolution in the clear text of s
83(1).
[24]
Conflating deregistration with dissolution in s 83(1) is the
consequence of the figurative stroke of a single pen by the same
authority, i.e. the Commission. Irrespective of whether the cause of
the deregistration is the winding up of the company in terms
of s
82(1) and (2) or the company’s failure to file its annual
returns in terms of s 82(3), deregistration ensues, triggering
the
automatic dissolution of the company. Thus it may happen that a
company is deregistered for failing to lodge returns. Even
though
that company still has assets and is trading, it could be dissolved.
By not distinguishing in s 83(1) of the new Act between
the causes of
deregistration, and consequent dissolution, the new Act differs from
the old Act, giving rise to the second difference.
[25]
The third difference between the old and the new Act is that the
court’s power to order restoration of registration in
terms of
s 73(6) of the old Act has not survived in the new Act. Instead, s
82(4) provides:
‘
If
the Commission deregisters a company as contemplated in subsection
(3), any interested person may apply in the prescribed manner
and
form to the Commission, to reinstate the registration of the
company.’
[26]
With similar clarity as s 83(1), the text of s 82(4) lends itself to
one meaning only: The Commission, not the court, has the
power to
reinstate a deregistered company. Similarly to the old Act, this
power of the Commission is limited to s 82(3) administrative
de-registrations, i.e. for failing to file returns. Section 82(4)
does not empower the Commission to restore a company deregistered
after being wound up in terms of s 82(1) and (2). Furthermore, s
82(4) strips the court of the power it previously had under s
73(6)
of the old Act to reinstate the registration of a company. In the
result, neither the Commission nor the court is empowered
under the
new Act to restore to the register of companies a company that has
been wound up. Thus if assets are discovered after
a company is wound
up and deregistered, neither the Commission nor the court can
reinstate the registration of the company; an
application to court to
avoid dissolution would be the only option available to a liquidator
or other interested person.
13
This is another example of the new Act conceptually disaggregating
registration from voiding dissolution.
[27]
The fourth difference is a policy shift. Applications in terms of ss
73(6)(a) and 420 of the old Act could be made to court.
In contrast,
the new Act strives to separate the administrative powers of the
Commission from the judicial powers of the court.
Separation
of Powers
[28]
This intention is born out firstly, in the following extract from the
Explanatory Memorandum.
‘
Chapter
8 of this draft proposes the migration of CIPRO, as well as the
enforcement functions currently within the dti, into a newly
established organ of state, with significantly expanded functions and
powers, to be known as the Companies and Intellectual Property
Commission. In particular, most of the administrative functions
currently assigned to the Minister under the Companies Act, apart
from the appointment of members of the institutions, and the making
of regulations, are placed within the jurisdiction of the Commission,
although the Minister would retain the ability to issue policy
directives to the Commission, and to require the Commission to
conduct an investigation in terms of the Act.
The
Explanatory Memorandum also anticipated that parties would have
aconstitutional right of access to a court for review.’
14
[29]
Secondly, the new Act accomplishes the aim of separating powers in s
82(4) above by repealing s 73(6) of the old Act and conferring
the
power to reinstate registration exclusively on the Commission, albeit
that such registration is limited to administrative reinstatements
only. Reinstatement of registration automatically voids dissolution.
Implicit in registration is the existence of the company,
even if
such existence is on paper only. Intuitively one anticipates that the
converse must also be true. But that is not the case.
Voiding
dissolution does not restore registration, automatically or
otherwise. On dissolution, nothing of the company as a company
exists. It may exist as an unregistered entity with or without assets
and liabilities. Nothing in s 83 expresses that on voiding
dissolution, the company is reinstated on the register. The words
‘any proceedings may be taken against the company as might
have
been taken if the company had not been dissolved’
15
could imply that voiding dissolution automatically reinstates
registration, save that such an interpretation does not address the
separation of powers conundrum created in the new Act, which did not
exist in the old Act. It begs the question whether the legislature
intended to grant to the courts the power to reinstate registration.
If it did, then it has not said so with the same clarity as
s 82(4)
and 83(1) of the new Act. Furthermore, s 83(4)(b), without more,
expressly enables litigation against the ‘revived’
but
unregistered company. Reinstating registration of the company is
therefore unnecessary unless the company has to be joined
as a
litigant.
[30]
Section 83(4)(b) was imported from s 420. However, because the new
Act strips the courts of their power to reinstate companies
on the
register, the words ‘any proceedings may be taken against the
company as might have been taken if the company had
not been
dissolved’ common to both sections, call for a fresh
interpretation in the new Act. Under the new Act the court
can no
longer void dissolution by reinstating registration, a power now
vested exclusively in the hands of the Commission. However,
the court
can void dissolution without reinstating registration. I will return
to this shortly.
[31]
The third way in which separation of powers is maintained is that
decisions of the Commission, including its failure or refusal
to
decide any matter that it is empowered to decide remains the subject
of review by the court by virtue of the court’s inherent
power
of review, reinforced by the
Promotion of Administrative Justice Act,
2000
or in terms of
s 156
of the new Act. In this regard I
respectfully agree with the judgments in
ABSA
Bank
and
Peninsula
Eye Clinic
above which also conclude that the power to reinstate the
registration of a deregistered company or close corporation vests
exclusively
in the Commission,
16
leaving the power of review with the courts.
17
[32]
Fourthly, the separation of powers is also achieved in s 83(4) of the
new Act. Whereas reinstating the registration of a deregistered
company is a power vested exclusively in the Commission under s
82(4), voiding the dissolution of a company under s 83(4) is a
power
vested exclusively in the court, except insofar as the dissolution is
voided automatically by the Commission upon restoring
registration
administratively.
[33]
A similarity between the old and new Acts is that the power to void
dissolution for reasons other than administrative deregistration,
remains the exclusive prerogative of the court. Under the old Act,
the court could avoid dissolution in one of two ways: Either
the
court could restore registration in terms of 73(6) after the
Registrar of Companies administratively removed the company from
the
register; the order restoring registration had the effect of deeming
the company ‘to have continued in existence as if
it had not
been deregistered’. Or, the court could avoid dissolution in
terms of s 420 after the company has been wound up.
So, no matter
what the cause of deregistration, the power to void dissolution
vested in the courts then under ss 73(6) (by restoring
registration)
and 420 and now only under s 83(4).
[34]
In a nutshell, between entrusting to the Commission the exclusive
power to reinstate registration administratively in terms
of s 82(4)
and to the court the exclusive power to void dissolution in terms of
s 83(4), the power to reinstate registration for
causes other than
administrative and because ‘it is just’ (the old s 73
power), has fallen between the cracks. This
lacuna is structurally
entrenched and practically enforced by the Commission, as the
discussion below will show.
Registration
requirements
[35]
The Commission’s function is to establish and maintain the
companies register. It must also make the information from
those
registers ‘efficiently and
effectively
available to the public’.
18
If the information in the registers is inaccurate it will be neither
efficient nor effective. The Commission steadfastly insists
on
compliance with its requirements for reinstating registration which,
for creditors, is onerous. Recently, the Commission reinforced
its
requirements in Practice Note 6 of 2012 which directs that as from 01
November 2012 a reinstatement application must be made
in form
CoR40.5 and, regardless of the cause or date of deregistration, the
documents to be submitted to the Commission must include
the
following:
a.
certified identity copies of directors and the applicant,
b.
deeds search reports to prove ownership (or otherwise) of immovable
property,
c.
an affidavit explaining the reasons for non-filing annual returns,
and
d.
sufficient documentary proof that the company was in business or that
it had outstanding assets or liabilities at the time of
deregistration.
[36]
All this information must be relevant to the Commission to exercise
its discretion to grant or refuse an application for reinstatement
of
the registration of a deregistered company in terms of s 82(4),
otherwise the Commission would not insist on it as it emphatically
does in Practice Note 6 of 2012.
[37]
As observed above, lodging annual returns remains a perquisite for a
company being registered. This requirement is compelled
by the
Commission’s function to provide information to the public and
other organs of state efficiently and effectively.
That other organs
of state may depend on such information could have macro-economic
implications. For instance, it would be misleading
to have many
companies registered but only a few that are economically active. But
the Commissioner’s priorities do not always
intersect with
creditors’ interests.
[38]
Creditors, as interested persons referred to in s 83(1), may apply to
reinstate the registration of a company. However, despite
being
persons most likely to have an interest, their right to apply to the
Commission is merely a theoretical veneer for a practical
impossibility. Creditors generally and Nulandis specifically do not
have information to fulfil the registration requirements compelled
by
the Commission.
[39]
The Commission must be aware of the difficulties creditors would have
in complying with the requirements for reinstating registration,
if
not before, then through the applications in
ABSA
Bank
and
Peninsula
Eye Clinic
which preceded the Practice Note. Still, the Commission insists on
compliance with its reinstatement requirements. This fortifies
my
view that compliance with the requisites for registration is not a
mere procedural formality but a substantive necessity for
efficient
management of the companies register.
[40]
In these circumstances, the court cannot order the reinstatement of
registration when the Commission’s requirements are
not
fulfilled, moderated or waived by the Commissioner. It would be
trenching on the powers of the executive and administrative
arm of
government in the face of clear evidence of what the Commission’s
strict requirements are for restoring registration.
It will also
undermine the principle of the separation of powers.
Voiding
dispenses with registration
[41]
However, as I intimated above, reinstatement of registration is
neither a prerequisite for nor a consequence of avoiding dissolution
under the new Act. Section 83(4) is confined to voiding dissolution
only without referring to deregistration. All that creditors
require
is an order voiding dissolution because s 83(4)(b) enables
proceedings to be taken against the company as if it had not
been
dissolved.
[42]
As stated above, when a company is deregistered but not dissolved, it
exists as an association of members. The same position
must obtain on
avoiding dissolution and before reinstatement of registration. On
dissolution being avoided the
bona
vacantia
vesting in the Treasury reverts to the association of members of the
deregistered company. Such an association exists for the limited
purpose of remedying the harm or adversity for which the voiding
application was granted. Many of the requirements for registration
are superfluous to the needs of creditors seeking satisfaction of
their claims from deregistered and dissolved companies. Lodging
annual returns is not as vital to the needs of creditors as
uncovering the assets and
sources
of revenue of the dissolved entity.
19
[43]
If there are no assets and the company is no longer in business then
the application by a creditor could be an exercise in
futility. It
would be just as well that the entity is not automatically reinstated
as a company on the register. If there are assets
then other
creditors would have an interest in avoiding dissolution.
Shareholders and other officials of the dissolved entity would
have
an interest in saving the assets from creditors. It would be up to
them to reinstate the registration of the company if they
wish to
join it to the proceedings as a party with legal standing. Hence they
are notified of the application and its outcome.
If the company is
not participating in legal proceedings, it does not have to be
reinstated on the register.
[44]
As stated above, reinstating registration would obviate an
application to void dissolution in terms of s 83(4). Complying with
the reinstatement requirements provides information as to whether the
company had outstanding assets or liabilities at the time
of
deregistration. The deeds office search reports would be another
indicator of the company’s fixed assets and liabilities.
If the
company did not have assets or liabilities at the time of
deregistration then the reinstatement of the registration could
be an
academic exercise, unless the applicant for reinstatement motivates
otherwise.
[45]
Nothing in 83(4)(b) implies that avoiding dissolution is
ab
initio,
that is, retrospectively to the date of the dissolution.
20
In any event, this is not a question I need consider in this
application.
The
UK Act
[46]
I digress briefly to compare provisions of the Companies Act, 2006 of
the United Kingdom (the UK Act) relating to deregistration
and
dissolution to show the extent to which the new Act converges and
diverges from the UK Act. Considering that the UK Act is
also new,
the similarities could point to external, objective conditions in
modern society to which both statutes seek to respond.
The
dissimilarities remind starkly of the differences in the internal,
local conditions of both jurisdictions, the size of each
and their
histories being obvious points of departure. Comparison is necessary
in the age of globalisation in order that like situations
attract
like remedies, with due deference to difference. This would cultivate
predictability and certainty in law across jurisdictions.
[47]
Similarly to s 83(1) of the new Act, under the headings
‘PART
31,
DISSOLUTION
AND RESTORATION TO THE REGISTER,
CHAPTER
1,
STRIKING
OFF,
Registrar’s
power to strike off defunct company’
the UK Act conflates deregistration with dissolution when dealing
with administrative striking off of a
company’s
name from the register. The registrar may either at her own instance
21
or
at
the voluntary instance of a company
22
strike off a defunct company,
23
i.e. a company not carrying on business or is not in operation, or a
company that has been
wound
up.
24
After striking off the name of the company off the register, the
registrar publishes notice to this effect in the Gazette.
25
On the publication of the notice the company is dissolved.
26
Like
the new Act, the conceptual separation of registration from
dissolution is entrenched, despite their conflation on deregistration
and
publication
of notice.
[48]
Similarly to s 83(2) and (3) of the new Act, the striking off does
not affect the liability of every director, managing officer
and
member of the company which
continues
and may be enforced as if the company had not been dissolved.
27
Significantly, nothing in ss 1000, 1001 and 1003 affects the power of
the court to
wind
up a company the name of which has been struck off the register.
28
Similarly, under s 83 (4)(a) of the new Act, a liquidator or any
other interested person may apply to court to void dissolution
of a
company if it is just and equitable. For example, voiding dissolution
for the purposes of winding up a company would be just
and
equitable.
29
[49]
In terms of s 1012(1) under CHAPTER 2 titled ‘PROPERTY OF
DISSOLVED COMPANY
-Property
vesting as bona vacantia’
of the UK Act,
30
when a company is dissolved, all property and rights of the company
immediately before its dissolution are deemed to be
bona
vacantia.
The UK Act expressly allows the court to do more than simply void
dissolution. It may on application by a person who claims an
interest
in the disclaimed property
31
order the vesting of the disclaimed property in, or its delivery to a
person entitled to it
32
on such terms as the court thinks fit. Although neither the old nor
the new Acts mention
‘bona
vacantia’,
our common law imports this concept into our jurisprudence.
33
Furthermore, the Appellate Division confirmed that it is the policy
and practice that the state will not enrich itself at the cost
of
someone having an interest in the re-registration of the company.
34
The court’s power to make ‘just and equitable’
orders under s 83(4) is sufficiently wide and flexible to order
the
vesting or delivery of property to persons who prove their clear
entitlement to it. The absence of express powers as in the
UK Act is
therefore not an impediment to granting similar relief under the new
Act.
[50]
Interestingly, under CHAPTER 3 titled ‘RESTORATION TO THE
REGISTER-
Administrative
restoration to the register’,
the UK Act permits a former director or former member of a company to
apply to the registrar to restore to the register a company
that has
been struck off the register under section 1000 whether or not the
company has been dissolved.
35
Here, as in s 1029 of the UK Act below, is another indicator that
notionally and practically in the UK as in SA, deregistration
and
dissolution are separable. Whereas deregistration determines
identity, dissolution emphasises assets and liabilities. The
insistence in both jurisdictions on the companies registers
maintaining updated records points to the modern need to assure by
registration the commercial viability of companies as intrinsic to
their identity.
[51]
Under the UK Act, the registrar’s requirements for
administrative restoration are similar to those under the new Act.
They include not only proof that the company was carrying on business
or in operation at the time of its striking off, but also
documents
relating to the company to update the records kept by the registrar.
36
[52]
The general effect of administrative restoration to the register is
that the company is deemed to have continued in existence
as if it
had not been dissolved or
struck
off the register.
37
However, on application made within three years after the date of
restoration of the company to the register, the court may give
such
directions and make such provision as seems just for placing the
company and all other persons in the same position as if
the company
had not been dissolved or struck off
oo
the
register.
38
In a case where the registrar has struck off a defunct company and
refused the application to restore it to the register, an application
to the court may be
OQ
made
within 28 days of notice of the registrar’s decision.
39
[53]
Unlike the UK Act, the effect of reinstating registration is not
express in the new Act; it is inferred from s 83(1) read with
s 82(4)
that an administrative reinstatement by the Commission automatically
voids dissolution. Whether the reinstatement and avoidance
will be
retrospective is not prescribed in the new Act as it is in the UK
Act. It follows therefore that any interested person
who wants
reinstatement and avoidance retrospectively will have to motivate
fully for such effect in an application to court to
either review the
Commission’s decision about registration or void dissolution by
relying on the ‘just and equitable’
test in terms of s
83(4) of the new Act.
[54]
Unlike the new Act, the UK Act vests in both the registrar and the
court the power to restore registration of a company. On
application
under section 1029 of the UK Act, the court may order the restoration
of the company to the register if the company
was struck off the
register under section 1000, 1001 or 1003 whether or not the company
has in consequence been dissolved.
40
The court may order the restoration of the company to the register if
the company was, at the time of the striking off, carrying
on
business or in operation, and if, in any other case, the court
considers
it just to do so.
41
[55]
The general effect of an order by the court for restoration to the
register is that the company is deemed to have continued
in existence
as if it had not been dissolved or struck off the register.
42
The
court may give such directions and make such provision as seems just
for placing the company and all other persons in the same
position
(as nearly as may be) as if the company had not been dissolved or
struck off the register.
43
Section 1032(4) of the UK Act enables the court to also give
directions as to the delivery to the registrar of such documents
relating to the company as are necessary to bring up to date the
records kept by the registrar.
[56]
Section 1034 allows the person in whom any property or right is
vested as
bona
vacantia
to dispose of, or of an interest in, that property or right despite
the fact that the company may be restored to the register.
If the
company is restored to the register the restoration does not affect
the disposition. Consideration is payable if property
has been
disposed of.
[57]
The comparison above of the new Act with the UK Act fortifies my view
that registration and dissolution of companies are separable.
Conceptually, they are not two sides of the same coin. In voiding
dissolution, reinstatement of registration is neither automatic
nor
necessary. Furthermore, the power of the court hearing a voiding
application is wide enough to give directions that are just
and
equitable. Such directions may vary from case to case. In a case in
which registration is necessary and practicable, the court
may
include directions in that regard without trenching on the
Commission’s powers. For instance, the court may give
directions
as to whether the company should be joined in the
proceedings and who should apply to reinstate its registration.
Final
Analysis
[58]
To summarise my analysis of the new Act: With the conflation of
deregistration and dissolution in s 83(1) and the clear text
of
82(2), (3) and (4) and 83(4)(a) I cannot, with respect, agree with
the opinion in
ABSA
Bank
para 42 that s 83(4)(a) of the new Act is reserved for voiding
dissolution following a winding up in terms of s 82(1) and (2) and
not deregistration as contemplated in s 82(3) when a company has
failed to file its annual returns. Accordingly, I respectfully
disagree with the interpretation in
ABSA
Bank
that s 83(4)(a) of the new Act:
‘
provides
for the type of situation envisioned by section 420 of the old Act
i.e. it gives a possible remedy to an interested party
when a company
is dissolved following a winding up in the circumstances set out in
section 82(1) and (2).’
Such
an interpretation leaves creditors without a remedy following
dissolution after an administrative deregistration, as the courts
in
those cases concluded. Leaving creditors without a remedy would have
the effect of denying them a right they had under the old
Act.
[59]
My interpretation is that s 83(4) empowers a court to declare the
dissolution of a company to be void. However, the discretion
to make
any order that is ‘just and equitable’ does not go far
enough to confer power on the court to order the reinstatement
of
Greenacres on the register of companies. That power remains
exclusively within the realm of the Commission. Relying on s 158
to
promote the purpose of the new Act, as Mr van Rooyen proffers, does
not assist creditors because the clarity of the text of
s 82(4) bars
any interpretation suggesting that the court has the power to
reinstate registration.
[60]
Once the Commission is served with an order voiding dissolution it
falls upon the Commission to determine whether the registration
should be reinstated. Any other interested person who considers
reinstatement of registration to be necessary may apply under s
82(4)
to the Commission to reinstate the registration of Greenacres. As I
said above, Nulandis is disinterested as to whether Greenacres
is
reinstated; its real interest is in Greenacres assets. If the
Commission requires Greenacres to be reinstated then it could
exercise its discretion on how that could be accomplished and whether
the reinstatement would be conditional or unconditional.
If the
Commission does nothing, Nulandis should not be frustrated in
pressing ahead with locating, attaching and executing against
Greenacres assets, subject to public notices to other creditors and
persons interested in the assets attached.
Just
and equitable test
[61]
All that remains now is to determine whether it is just and equitable
to avoid dissolution of Greenacres. Effectively, an order
on
dissolution that ‘the Court thinks fit’ in terms of s 420
and ‘one that is just and equitable’ in terms
of s
83(4)(a) are not different. Both give the court wide discretion to
decide each application on its own merits. In
Ex
parte Liquidator Natal Milling Co (Pty) Ltd
1934 NPD 312
the interpretation by a single judge of this division of
s 191 of the Companies Act, 1926 which was almost identical to s 420
of
the old Act, remains good authority in summarising the approach as
follows:
‘
According
to my view the power of the Court to make an order declaring the
dissolution to have been void is unlimited in any respect,
and as the
circumstances under which the section may be brought into operation
are likely to vary in every case, it seems to me
inadvisable to lay
down any principle upon which the Court will act....
Each
case, I think should be decided on its merits.’
[62]
In that case shareholders and the liquidator supported the voiding
application. It was in the interests of shareholders. There
were no
creditors. No one was prejudiced.
44
The court cautioned against voiding dissolution unless for instance,
new assets are discovered or some fraud comes to light, or
the
dissolution has become an instrument of injustice.
45
[63]
The effect of the dissolution and consequent vesting of Greenacres’
assets, if any, in the national Treasury is an injustice
to Nulandis
as a creditor. Nulandis obtained judgment on 01 November 2007.
Greenacres was unsuccessful in an application for rescission
which
was dismissed on 2 June 2008. Its appeal to the full bench was
dismissed on 28 September 2010. That was after Greenacres
was
deregistered on 16 July 2010 for failing to submit annual returns.
Nulandis obtained a valid judgment by default but could
not enforce
it until Greenacres’ unsuccessful application to rescind the
judgment and its appeal had been dismissed. Furthermore,
Greenacres
persisted with the appeal even after it was deregistered and lost its
legal status. Those proceedings denied Nulandis
the remedies
available to it under the old Act and propelled it into the regime of
the new Act.
[64]
This case is similar to
ABSA
Bank
and
Peninsula
Eye Clinic
in that in all three cases the applications were brought in terms of
s 83(4) of the new Act. A material factual difference between
this
case and those two Cape cases is that the judgment debt the applicant
seeks to enforce in this case is valid. It was obtained
against
Greenacres whilst its legal status as a registered company was still
intact. In
ABSA
Bank
the company was deregistered before it could be wound up by a
creditor other than ABSA Bank. The latter’s application for
provisional winding up could therefore not be granted against a
non-existent entity. In
Peninsula
Eye Clinic
the arbitration award sought to be enforced was a nullity because the
company persisted with the arbitration despite being stripped
of its
legal status by deregistration.
[65]
Importantly, the effect of vesting the assets as
bona
vacantia
in the Treasury would be unfair expropriation of the right of
creditors to be paid if they do not have a right to recover their
claims. As noted above, that has not been our practice under the
common law and should be even less so under our constitutional
democracy.
46
A creditor’s right could be a real right such as a loan secured
by a bond over immovable property as was the creditor’s
claim
in
ABSA
Bank.
Although Nulandis’ judgment is a personal right for
agricultural chemicals sold and delivered, it nevertheless is a valid
judgment debt. Because of the manifest unfairness of denuding
creditors of their right to have their claims paid, the new Act has
to provide the means for them to recover payment from a deregistered
and dissolved company. On the basis that dissolution is an
instrument
of injustice it is just and equitable in the circumstances to avoid
dissolution.
[66]
Mr van Rooyen submitted that Item 11 of Schedule 5 to the new Act
entitled Nulandis to rely on s 73(6) of the old Act. Item
11
provides:
‘
(1)
Any right or entitlement enjoyed by, or obligation imposed on, any
person in terms of any provision of the previous Act, that
had not
been spent or fulfilled immediately before the effective date is a
valid right or entitlement of, or obligation imposed
on, that person
in terms of any comparable provision of this Act, as from the date
that the right, entitlement or obligation first
arose, subject to the
provisions of this Act.’
[67]
Mr van Rooyen contended that Nulandis had the right under s 73(6)(a)
of the old Act to apply to court for an order restoring
the
registration of Greenacres on the grounds that it is just. If that
had happened then Greenacres would have been deemed to have
continued
to exist as if it had not been deregistered. Furthermore, s 73(6)(b)
imbued the court with the flexibility to give directions
and make
such provisions to place, as nearly as may be, Greenacres and all
other persons in the position as if the company had
not been
deregistered. These are the rights or entitlements Nulandis enjoyed
in terms of the old Act but now are lost to it under
the new Act,
unless they are revived by Item 11 of Schedule 5 to the new Act.
[68]
The main difficulty with this submission is that reinstatement of
registration is ‘subject to the provisions of this
Act’.
That hooks Item 11 back into s 82(4) if registration is required.
[69]
Another difficulty that arises from Mr van Rooyen’s submission
is that even if Nulandis successfully invokes Item 11,
because it has
a valid judgment, and the deregistration occurred under the old Act,
other creditors whose claims arise under the
new Act have no
realistic means of reinstating the registration of a deregistered
company. Consequently an interpretation has to
be found within the
new Act to enable creditors under the old and new Acts to recover
their claims.
[70]
As I have found above, reinstating a company is not a prerequisite
for voiding dissolution. Avoiding dissolution is the route
creditors
have to pursue to recover their claims. If my interpretation of s
83(4) above is incorrect and
ABSA
Bank
and
Peninsula
Eye Clinic
are correct, then Item 11 offers a remedy for Nulandis, albeit not by
means of reinstatement of registration, as I pointed out
above. Item
11 hooks back to s 83(4) to invoke the court’s power to grant
dissolution that is just and equitable. Nulandis’
right or
entitlement to avoid dissolution under the old Act has not been spent
and s 83(4) being most closely comparable to s 420
of the old Act is
activated.
[71]
If this interpretation is also incorrect then the concerns raised in
ABSA
Bank
and
Peninsula
Eye Clinic
must be addressed by the legislature and the Commission.
The
interpretation in
ABSA
Bank
and
Peninsula
Eye Clinic
is that reinstating registration is a prerequisite for voiding
dissolution and since the court has no power to reinstate, as only
the Commission can reinstate, an interested person who cannot fulfil
the requirements for reinstating registration is without a
remedy.
Reading in into the new Act as suggested in these judgments may be
one of several ways in which to fix the deficiency.
However, without
having had the benefit of the Commissioner’s participation in
these proceedings to formulate the most appropriate
intervention and
evaluate its impact, I hesitate to suggest any amendment. It may turn
out that the Commission might moderate the
requirements for creditors
to reinstate registration. Or, the Commission may establish a
separate register for companies resurrected
by a voiding application.
Or both.
[72]
The order I grant has immediate effect. Whether it should also have
retrospective effect should be determined when a case for
retrospectivity is made. For instance, if it transpires that
Greenacres continued to trade as a company despite being deregistered
then this order could have retrospective effect as the order in
Fintech
(Pty) Ltd v Awake Solutions (Pty) Ltd and Others
[2012] JOL 29612
(GSJ) did.
[73]
Since writing this judgment I have had the privilege of reading
ABSA
Bank v CIPC and Others
Case No: A29/13 delivered on 19 April 2013, the judgment of the full
bench which overturned
ABSA
Bank.
[74]
Like the full bench of the Cape Division, I conclude that the new Act
strikes out to be different from the old Act by combining
deregistration and dissolution in s 83(1). I also respectfully agree
that s 83(1) does not distinguish between deregistration triggered
by
winding up and administrative deregistration for failing to render
returns. However, I disagree with the interpretation that
the new Act
does not distinguish at all between deregistration and dissolution.
47
Furthermore, based on the principle of separation of powers discussed
above, I respectfully cannot agree with the interpretation
that
voiding dissolution in terms of s 83(4) authorises the automatic
restoration of a company on the register, as the full bench
proposed
in the following extracts:
‘
If
s 83(1) applies to all companies dissolved by the removal of their
names from the register, there is no reason that s 83(4),
which forms
part of the same section and applies ‘at any time after a
company has been dissolved’, should not apply
to a company
dissolved by the removal of its name from the register pursuant to s
82(3).’
48
And
‘
The
important modification is that the court is now not confined to
making an order declaring the dissolution void; it may make
any other
order that is just and equitable in the circumstances. (Although the
references in s 83(4)(a) to a declaration of voidness
and to any
other order that is just and equitable are linked by the word ‘or’,
I do not believe that the court can
grant only one or the other. An
order that is just and equitable may entail a declaration that the
dissolution is void together
with ancillary relief.)’
49
And
further more:
‘
[59]
.I am inclined to think that if the removal of a company’s name
from the register is the event bringing about its dissolution,
an
order that the dissolution is void would necessarily imply that the
company’s name must be restored to the register .
. If it were
otherwise, how could such a revived company thereafter again be
dissolved (since a company can only be dissolved by
the removal of
its name from the register)? However, I am reluctant to use the word
‘reinstate’ (the word used in s
82(4)) in case it should
be thought to imply some effect not intended by the court order. I
would rather use ‘restore’.
In
disagreeing with the full bench I do so cautiously but fortified by
similar views of the two judges in
ABSA
Bank
and
Peninsula
Eye Clinic
on the bar against court ordered reinstatement of registration.
[75]
The Commission ought to be alive to the controversy and possible
shortcomings in the legislation and the regulations. Surprisingly,
it
has failed to participate in this case, the two Cape cases and the
appeal to the full bench. Its silence is unhelpful at this
formative
stage of the development of jurisprudence on the new Act.
Accordingly, I request Nulandis to serve a copy of this judgment
on
the
Minister
of Trade and Industry under whose watch the Commission falls with the
view to alerting him to the controversy and to elicit
the
Commission’s participation in resolving it.
[76]
The order I grant is the following:
a.
The dissolution of the Greenacres Management Services (Pty) Ltd
(deregistered) is declared to be void.
b.
Greenacres Management Services (Pty) Ltd (deregistered) is revived as
an association of its members.
c.
The assets of Greenacres Management Services (Pty) Ltd (deregistered)
are no longer
bona
vacantia.
d.
The members of Greenacres Management Services (Pty) Ltd
(deregistered) are re-vested with its assets.
e.
Any interested person may apply on these papers, supplemented insofar
as is necessary for further relief.
f.
The costs of this application shall be paid by Greenacres Management
Services (Pty) Ltd (deregistered)
g.
This order shall be published in English once in the Government
Gazette and once in a newspaper circulating in KwaZulu-Natal.
h.
This order shall be served on:
i.
Greenacres Management Services (Pty) Ltd (deregistered) at 218 Boom
Street, Pietermaritzburg.
ii.
Mr Gary Patrick Porrit at 218 Boom Street, Pietermaritzburg.
iii.
The Minister of Trade and Industry, Pretoria
iv.
The Companies and Intellectual Property Commissioner, Pretoria.
v.
The Minister of Finance.
D.Pillay
J
Appearances://
Appearances:
Counsel
for the Appellant: R.M. Van Rooyen
Instructed
by: Venn Nemeth & Hart Inc.
281
Pietermaritz Street
Pietermaritzburg
Ref:
(M Swanepoel/Yolande
/21P063307)
1
Ex
parte Sengol Investments (Pty) Ltd
1982 (3) SA 474
(T) at 477F-G.
2
Miller
and Others v Nafcoc Investment Holding Company Ltd and Others
2010 (6) SA 390
(SCA) para 11 the consequence of winding up was not
deregistration but dissolution in terms of s 419 of the old Act.
3
Cilliers, Benade and De Villiers
Company
Law
3rd edition p 440;
Miller
and Others
v
Nafcoc
Investment Holding Co. Ltd and Others
2010 (6) SA 390
SCA at 395A-E, para 11.
4
S
73 (6A) of the old Act provides: Notwithstanding subsection (6), the
Registrar may, if a company has been deregistered due to
its failure
to lodge an annual return in terms of
section 173,
on application by the company concerned and on payment of the
prescribed fee, restore the registration of the company, and
thereupon the company shall be deemed to have continued in existence
as if it had not been deregistered: Provided that the Registrar
may
only so restore the registration of the company after it has lodged
the outstanding annual return and paid the outstanding
prescribed
fee in respect thereof.’
5
S
76 (6) and s 73(6A) of the old Act.
6
Ex
Parte Bowman: In Re International Rock Products (Pty) Ltd
1985
(1) SA 70
(W) at 73B-C.
7
Above
at 73G-H.
8
Above
at 73H-I.
9
Meskin
Henochsberg
on the Companies Act
vol 1 Butterworths at 900 (1-901);
Pieterse
v Kramer N.O.
1977 (1) 589 (AD) at 601F-G;
Sandton
Town Council v Sanddown Extension 2 (Pty) Ltd
1991 (3) SA 486
(W); Morris v Harris
1927 AC 252
(HL) at 257-258
268-269
10
Page
6 of the
Explanatory
Memorandum
to the new Act.
11
Part
D of Chapter 3 - Dissolving and De-registering Companies clauses
28-29 of the
Explanatory
Memorandum
of 2007.
12
Amended
by
s 52
of Companies Amendment
Act No. 3 of 2011
13
S
83(4)(a)
14
Page
8 of Explanatory Memorandum.
15
S
83 (4)(b) of the new Act.
16
ABSA
Bank
para 43.
17
Peninsula Eye Clinic
para 25-26.
18
S
187 (4) (c) of the new Act.
19
Ex
Parte
Bowman: In Re International Rock Products (Pty) Ltd
1985 (1) SA 70
(W) at 73F-H.
20
Meskin
Henochsberg
on the Companies Act
vol 1 Butterworths 900 (1-901).
21
S
1000 and 1001 of the UK Act.
22
S
1003 of the UK Act.
23
S
1000 of the UK Act.
24
S
1001 of the UK Act.
25
S
1000 (5), 1001 (3) and 1003 (4) of the UK Act.
26
S
1000 (6), 1001 (4) and 1003 (5) of the UK Act.
27
S
1000 (7) (a); 1003 (6) (a) of the UK Act.
28
S
1000 (7) (b); 1003 (6) (b) of the UK Act
29
Ex Parte Bowman: In Re International Rock Products (Pty) Ltd
1985 (1) SA 70
(W) at 73A.
30
S
1012 (1) of the UK Act.
31
1017
(1) (a) of the UK Act.
32
1017
(
2
)
(a) and (4) of the UK Act. In terms of s 1021, similar powers apply
to Scotland.
33
Antares
International Limited and Others v Louw Coetzee & Malan
Incorporated and Others
Case No. 11529/2011 (delivered on 2 SEPTEMBER 2011) (WC) para 36;
Rainbow
Diamonds (Edms) Bpk En Andere v Suid-Afrikaanse Nasionale
Lewensassuransiemaatskappy
1984 (3) SA 1
(A)
34
Rainbow
Diamonds
headnote.
35
S
1024 of the UK Act.
36
S1025
of the UK Act.
37
1028(1)
of the UK Act.
38
S
1028 (4) of the UK Act.
39
S1030
(4) and (5) of the UK Act.
40
S1029
(1) (c) of the UK Act.
41
S1031
(1) (a) and (c) of the UK Act.
42
S1032
(1) of the UK Act.
43
S1032
(3) of the UK Act.
44
At
314
45
At
313
46
S
25 (2) of Constitution, 1996.
47
ABSA
Bank
(Full Bench) Para 43; 47, 52.
48
ABSA
Bank
(Full Bench) Para 43.
49
ABSA
Bank
(Full Bench) Para 48.