,MCL5903 Assignment 2 (COMPLETE ANSWERS)
Semester 2 2025 - DUE 5 September 2025; 100%
TRUSTED Complete, trusted solutions and
explanations.
The Status of Contracts Entered into by Deregistered Companies
under the Companies Act 71 of 2008: A Critical Analysis of Sand-
Ton Computer Systems (Pty) Ltd v Department of Education
(Hypothetical)
Introduction
Corporate personality is one of the cornerstones of modern company
law. A company, once incorporated, exists as a separate juristic person
distinct from its members, with the capacity to hold property, sue and be
sued, and to enter into legally binding contracts. This principle,
entrenched in section 19(1)(b) of the Companies Act 71 of 2008 ("the
Act"), ensures continuity and legal certainty in commerce. However, this
neat separation between company and shareholder becomes complicated
when the company is deregistered.
The present problem concerns Sand-Ton Computer Systems (Pty) Ltd
("Sand-Ton"), a company deregistered by the Companies and
Intellectual Property Commission ("CIPC" or "the Commission") for
failure to file annual returns in terms of section 33 of the Act. While
deregistered, Sand-Ton concludes a government contract with the
Department of Education ("the Department"). Thereafter, Sand-Ton is
reinstated to the companies register. Upon completion of the contract,
the Department refuses payment, arguing that Sand-Ton was not a
corporate entity at the time of contracting, thereby rendering the
agreement void ab initio.
, The issue that arises is whether contracts entered into by deregistered
companies are valid, void, or voidable, and whether reinstatement cures
any such defect retrospectively. This essay will critically analyse the
relevant provisions of the Companies Act 71 of 2008, examine
applicable case law, and engage with scholarly commentary to
determine whether the Act adequately addresses the uncertainty
surrounding contracts concluded during deregistration.
The Legal Effect of Deregistration
Statutory framework
Under section 82(3) of the Act, the Commission may deregister a
company if it has failed to file annual returns for two or more years,
provided certain procedural requirements are met. Section 82(4)
provides that deregistration has the effect of dissolving the company.
Section 83(1) further provides that when a company is dissolved, it
ceases to exist as a juristic person.
This statutory language is clear: deregistration terminates the existence
of the company. Without legal personality, the company cannot hold
rights, incur obligations, or enter into contracts. Any attempt by its
directors or shareholders to transact on its behalf would be ultra vires,
lacking legal foundation.
Common law position
At common law, deregistration was understood to extinguish the
company’s existence. The Appellate Division in Ex parte Sengol
Investments (Pty) Ltd 1983 (2) SA 141 (T) confirmed that deregistration
has the effect of bringing the corporate existence to an end, reverting
ownership of its assets to the State as bona vacantia. The deregistered
company could neither sue nor be sued.
Semester 2 2025 - DUE 5 September 2025; 100%
TRUSTED Complete, trusted solutions and
explanations.
The Status of Contracts Entered into by Deregistered Companies
under the Companies Act 71 of 2008: A Critical Analysis of Sand-
Ton Computer Systems (Pty) Ltd v Department of Education
(Hypothetical)
Introduction
Corporate personality is one of the cornerstones of modern company
law. A company, once incorporated, exists as a separate juristic person
distinct from its members, with the capacity to hold property, sue and be
sued, and to enter into legally binding contracts. This principle,
entrenched in section 19(1)(b) of the Companies Act 71 of 2008 ("the
Act"), ensures continuity and legal certainty in commerce. However, this
neat separation between company and shareholder becomes complicated
when the company is deregistered.
The present problem concerns Sand-Ton Computer Systems (Pty) Ltd
("Sand-Ton"), a company deregistered by the Companies and
Intellectual Property Commission ("CIPC" or "the Commission") for
failure to file annual returns in terms of section 33 of the Act. While
deregistered, Sand-Ton concludes a government contract with the
Department of Education ("the Department"). Thereafter, Sand-Ton is
reinstated to the companies register. Upon completion of the contract,
the Department refuses payment, arguing that Sand-Ton was not a
corporate entity at the time of contracting, thereby rendering the
agreement void ab initio.
, The issue that arises is whether contracts entered into by deregistered
companies are valid, void, or voidable, and whether reinstatement cures
any such defect retrospectively. This essay will critically analyse the
relevant provisions of the Companies Act 71 of 2008, examine
applicable case law, and engage with scholarly commentary to
determine whether the Act adequately addresses the uncertainty
surrounding contracts concluded during deregistration.
The Legal Effect of Deregistration
Statutory framework
Under section 82(3) of the Act, the Commission may deregister a
company if it has failed to file annual returns for two or more years,
provided certain procedural requirements are met. Section 82(4)
provides that deregistration has the effect of dissolving the company.
Section 83(1) further provides that when a company is dissolved, it
ceases to exist as a juristic person.
This statutory language is clear: deregistration terminates the existence
of the company. Without legal personality, the company cannot hold
rights, incur obligations, or enter into contracts. Any attempt by its
directors or shareholders to transact on its behalf would be ultra vires,
lacking legal foundation.
Common law position
At common law, deregistration was understood to extinguish the
company’s existence. The Appellate Division in Ex parte Sengol
Investments (Pty) Ltd 1983 (2) SA 141 (T) confirmed that deregistration
has the effect of bringing the corporate existence to an end, reverting
ownership of its assets to the State as bona vacantia. The deregistered
company could neither sue nor be sued.
