CIPC: Deregistration of Companies due to Non-Compliance with the Companies Act

CIPC: Deregistration of Companies due to Non-Compliance with the Companies Act

• 22 January 2025
• CIPC
• South African Accounting Academy

Summary:

The Companies and Intellectual Property Commission (CIPC) has initiated a large volume of deregistrations due to continued low compliance with Annual Returns, Beneficial Ownership, and other obligations under the Companies Act.

Article:

In its most recent media release, CIPC stated that the high level of inactive business among companies significantly contributes to low compliance levels, therefore companies are advised to register the companies only when there is a genuine economic or business opportunity. Directors must comply with the provisions of the Companies Act, even if their companies are dormant, as dormant companies pose a risk of being used for money laundering, terror financing, and other criminal activities.

The consequences of deregistration for non-compliant businesses are severe and they include directors being personally liable for the company’s debts, bank accounts will be frozen by the relevant banks, service providers may refuse to deliver services and creditors may refuse to pay, as the business does not legally exist.

Although businesses can apply for reinstatement after final deregistration, only those that can provide confirmation of economic activity or other economic value at the time of final deregistration will be reinstated. The reinstatement process is cumbersome, requiring evidence of economic activity along with the relevant form. For detailed requirements please refer to Practice Note 1 of 2022. Additionally, all outstanding annual returns must be paid and submitted once the application has been processed.

The CIPC issues reminders to businesses about their responsibilities to comply with annual returns and beneficial ownership requirements timeously via email and sms directly to the provided contact details of directors and members. Clients are urged to ensure that their contact details are up to date all the time.

Businesses are advised to check their company status via Bizportal or e-Services, if the current business status is AR deregistration process, businesses must submit all outstanding Annual Returns and Beneficial Ownership Declarations urgently to avoid final deregistration and the consequences thereof.

Click here to download Media Statement 1 of 2025:

https://www.cipc.co.za/wp-content/uploads/2025/01/CIPC-Media-Statements-on-Deregistrations-1400.pdf

Relevance to Auditors, Independent Reviewers & Accountants:

• The Companies Act is yet another piece of legislation that your clients must comply with, and which you must assess compliance with.  If they don’t comply with the relevant laws and regulations, you have certain reporting obligations in terms of NOCLAR (NOn-Compliance with Laws And Regulations) – this could include reporting to management, qualifying your audit opinion, reporting a Reportable Irregularity, etc.
• As an auditor, independent reviewer and accountant, you also need to monitor your client’s compliance with the Companies Act and all relevant notices/enforcements/practice notes/customer letters issued by CIPC as the regulator.
• Where you perform these compliance tasks on behalf of your client, you need to ensure that you comply with all relevant notices/enforcements/practice notes/customer letters issued by CIPC as the regulator.

Relevance to Your Clients:

• An entity (company or close corporation) has a duty to comply with the Companies Act, and all relevant notices/enforcements/practice notes/customer letters issued by CIPC as the regulator.

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