, PLEASE USE THIS DOCUMENT AS A GUIDE TO ANSWER YOUR ASSIGNMENT
1. The Companies and Intellectual Property Commission (‘the Commission’) removes the name
of Sand-Ton Computer Systems (Pty) Ltd (‘Sand-Ton’) from the registry of companies.
According to the Commission, Sand-Ton has failed to file its annual financial returns for two
consecutive years, as it is required in terms of section 33 of the Companies Act 71 of 2008 (‘the
Companies Act’). Following the removal of its name from the registry, Sand-Ton receives a
government contract from the Department of Education (‘the Department’), to supply
computers for the rural schools based in KwaZulu-Natal. While executing on its contract,
Sand-Ton is reinstated to the register administered by the Commission. Upon completion of its
task in terms of the agreement, the Department declines to pay for its obligations to Sand-Ton.
The reason offered by the Department is that Sand-Ton was never a corporate entity at the time
of the conclusion of the contract, which according to the Department, renders the contract
invalid. With reference to the relevant provisions of the Companies Act 71 of 2008, prescribed
case law and prescribed journal article; provide a critical discussion of the status of the contract
entered into between Sand-Ton and the Department. In your discussion, consider whether the
Companies Act has adequately addressed the status of contracts (or proceedings) entered into
while the company was deregistered.
1. Introduction
The removal of a company from the register of companies has significant legal and commercial
consequences, particularly regarding its capacity to enter into contracts and enforce rights during the
period of deregistration. In terms of the Companies Act 71 of 2008 (hereafter “the Companies Act”),
the Companies and Intellectual Property Commission (CIPC) may deregister a company that fails to
comply with its statutory obligations, such as filing annual returns (s 33). Deregistration results in the
suspension of the company’s legal personality, creating uncertainty for third parties who transact
with it. This issue is particularly evident in cases where a deregistered company later becomes
reinstated, raising questions about the retrospective effect of such reinstatement on transactions
concluded during the period of deregistration.
The present scenario concerning Sand-Ton Computer Systems (Pty) Ltd (“Sand-Ton”) illustrates the
tension between deregistration, reinstatement, and the validity of contracts. Sand-Ton was
deregistered due to non-compliance with its statutory duty to file returns, yet it entered into a
contractual agreement with the Department of Education during its deregistration. When Sand-Ton
was subsequently reinstated, the Department refused to honour its obligations on the basis that
Sand-Ton lacked legal capacity at the time the contract was concluded. This dispute calls for a
critical engagement with the statutory provisions of the Companies Act, relevant case law such as
Newlands Surgical Clinic (Pty) Ltd v Peninsula Eye Clinic (Pty) Ltd 2015 (4) SA 34 (SCA), and
academic commentary on whether reinstatement retroactively validates corporate acts performed
during deregistration.
This discussion will explore the legal consequences of deregistration and reinstatement, the judicial
approach to the continuity of corporate personality, and the implications for Sand-Ton’s contractual
rights. Ultimately, it will critically assess whether the Companies Act adequately addresses the
uncertainty surrounding the status of contracts entered into while a company is deregistered,
balancing the protection of third parties with the integrity of the corporate registry.
1. The Companies and Intellectual Property Commission (‘the Commission’) removes the name
of Sand-Ton Computer Systems (Pty) Ltd (‘Sand-Ton’) from the registry of companies.
According to the Commission, Sand-Ton has failed to file its annual financial returns for two
consecutive years, as it is required in terms of section 33 of the Companies Act 71 of 2008 (‘the
Companies Act’). Following the removal of its name from the registry, Sand-Ton receives a
government contract from the Department of Education (‘the Department’), to supply
computers for the rural schools based in KwaZulu-Natal. While executing on its contract,
Sand-Ton is reinstated to the register administered by the Commission. Upon completion of its
task in terms of the agreement, the Department declines to pay for its obligations to Sand-Ton.
The reason offered by the Department is that Sand-Ton was never a corporate entity at the time
of the conclusion of the contract, which according to the Department, renders the contract
invalid. With reference to the relevant provisions of the Companies Act 71 of 2008, prescribed
case law and prescribed journal article; provide a critical discussion of the status of the contract
entered into between Sand-Ton and the Department. In your discussion, consider whether the
Companies Act has adequately addressed the status of contracts (or proceedings) entered into
while the company was deregistered.
1. Introduction
The removal of a company from the register of companies has significant legal and commercial
consequences, particularly regarding its capacity to enter into contracts and enforce rights during the
period of deregistration. In terms of the Companies Act 71 of 2008 (hereafter “the Companies Act”),
the Companies and Intellectual Property Commission (CIPC) may deregister a company that fails to
comply with its statutory obligations, such as filing annual returns (s 33). Deregistration results in the
suspension of the company’s legal personality, creating uncertainty for third parties who transact
with it. This issue is particularly evident in cases where a deregistered company later becomes
reinstated, raising questions about the retrospective effect of such reinstatement on transactions
concluded during the period of deregistration.
The present scenario concerning Sand-Ton Computer Systems (Pty) Ltd (“Sand-Ton”) illustrates the
tension between deregistration, reinstatement, and the validity of contracts. Sand-Ton was
deregistered due to non-compliance with its statutory duty to file returns, yet it entered into a
contractual agreement with the Department of Education during its deregistration. When Sand-Ton
was subsequently reinstated, the Department refused to honour its obligations on the basis that
Sand-Ton lacked legal capacity at the time the contract was concluded. This dispute calls for a
critical engagement with the statutory provisions of the Companies Act, relevant case law such as
Newlands Surgical Clinic (Pty) Ltd v Peninsula Eye Clinic (Pty) Ltd 2015 (4) SA 34 (SCA), and
academic commentary on whether reinstatement retroactively validates corporate acts performed
during deregistration.
This discussion will explore the legal consequences of deregistration and reinstatement, the judicial
approach to the continuity of corporate personality, and the implications for Sand-Ton’s contractual
rights. Ultimately, it will critically assess whether the Companies Act adequately addresses the
uncertainty surrounding the status of contracts entered into while a company is deregistered,
balancing the protection of third parties with the integrity of the corporate registry.
