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Godknows Hofisi

Striking off refers to the removal of a business entity from the register of such entities maintained by the Registrar of Companies and Other Business Entities (COBE).

This is regulated by section 52 of the Companies and Other Business Entities Act (Chapter 24:31), which replaced the Companies Act (Chapter 24:03).

Based on the said section 52 there are two scenarios provided for in the Act that give rise to striking off:

At the instance of the Registrar, or

When the business entity itself voluntarily initiates.

Striking off initiated by the Registrar

According to section 52(1) of the COBE Act where the registrar has reasonable grounds to believe that a registered business entity, for example a company, is not carrying on business or is not in operation, he or she may send the entity a written notice to that effect.

He or she states that if an answer showing cause to the contrary ( in other words that the business entity is in operation) within 14 days from date of the notice, a notice will be published in the Government Gazette with a view to striking off the name of the entity from the register.

In terms of section 52(3) unless the registrar receives an answer within 14 days of the notice sent to the business entity the registrar may publish in the Gazette and send to the entity, a notice that at the expiration of one month from the date of that notice the entity’s name will, unless cause is shown to the contrary, be struck off the register and the entity will be dissolved.

The process is therefore two staged. Initially the Registrar writes to the entity.

If no cause is shown then again the business entity has up to one month to do so when the notice in the Gazette is still running.

If the registrar strikes off the business entity’s name pursuant to sections 52(1) and 52(2) he or she shall publish notice of the strike off in the Gazette as required by 52(3).

Striking off initiated by the business entity itself

Section 52(6) provides for striking off at the instance of the business entity itself. According to the section if the Registrar receives from a registered business entity a written statement in the form prescribed (currently new CR14), signed:

In the case of a company, by every director of the entity, or

In the case of a private business corporation, by every member, stating that the entity has ceased to carry on business and has no assets, the Registrar may strike the entity’s name from the register and shall publish notice of the striking off in the Gazette.

Remedies after striking off

Section 52(8) provides remedies post striking off of a defunct business entity. According to the section where the name of a business entity has been struck off from the register in accordance with section 52 any creditor or member or former member of the entity may at any time after the date of publication of the notice of striking off of the entity under section 52(5) apply to the magistrate court within whose area of jurisdiction the entity had its principal place of business for an order that the entity’s name be restored to the register.

If the court is satisfied that:

The entity was carrying on business or in operation when its name was struck off or

It is otherwise just that the entity’s name should be restored to the register the court may grant the order sought.

In addition the court may:

Direct that the entity, or any officer or member of the entity, need not file or lodge any return that the entity, officer of member may have been required to file or lodge in terms of the Act, or

Give such directions and orders  as seem just for placing the entity and all other persons in the same position, as nearly as may be, as if the entity’s name had not been struck off from the register.

According to section 52(9) upon the making of an order in terms of section 52(8) the business entity concerned shall be deemed, subject to the terms and conditions of the order, to have continued in existence as if its name had not been struck from the register.

It appears section 52(8) provides remedies for restoring the entity’s name if the striking off was done at the instance of the Registrar and not the business itself.

There are instances when the directors of a company for example may make the mistake of causing the business entity to be struck when the entity is still operating or has assets. There appears to be a gap.

Conclusion

The decision to strike off the business at the instance of the Registrar is not taken lightly. However, there are remedies available through the court where circumstances warrant restoration. It is however not clear if the same post striking off remedy is available in the case of voluntary striking off by a business entity.

Disclaimer

This simplified article is for general information purposes only and does not constitute the writer’s professional advice.

Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), CA(Z), MBA(EBS,UK) is a legal practitioner / conveyancer, chartered accountant, corporate rescue practitioner, registered tax accountant and consultant in deal structuring and is an experienced director of companies. He writes in his personal capacity. He can be contacted on +263 772 246 900 or [email protected]