CIPRO embarks on deregistration by stealth
Don’t be surprised if your close corporation or company has been deregistered by the Companies and Intellectual Properties Registration Office (CIPRO). In Practice Note 6 of 2009 CIPRO publishes a stern warning to CCs and companies that fail to submit annual returns. They say failure to comply (by month-end of the month following your company’s CIPRO registration anniversary date) will result in your company being summarily deregistered. Forget warnings or reminder notices, your company will simply ‘disappear’ from the register. Is this serious enough for your liking? The future of your business lies in the hand of a division of the Department of Trade and Industry (dti). CIPRO has the power to disintegrate your company if you fail to send in a form confirming your company details and the rand value of your latest financial year turnover.
The organisation has been in the news for all the wrong reasons of late. They’ve been lambasted for administrative efficiencies and tender irregularities, with allegations of the latter resulting in the suspension of CIPRO chief executive, Keith Sendwe, and his head of information, Michael Twum-Darko.
What is the annual return?
The decision to require all companies and close corporations to submit an annual return was initially dismissed as little more than a fund raising initiative – yet another ‘tax’ on an already overburdened private sector. This argument was underpinned by the rather nonsensical data component of the annual report. CIPRO notes: “An annual return contains a summary of the latest information of an entity which should be received by CIPRO at least once a year…” But essentially, in the absence of other ‘change’ notifications, this submission is merely a confirmation that your business is still open for business.
“Annual returns must be lodged within the anniversary month of an entity’s incorporation, up until the end of the month thereafter.” So, if you ‘incorporate’ or register a new company in May 2010, your anniversary month will be May 2011 and every May thereafter. Your first annual return must be lodged between 1 May and 30 June 2011 – and in the same period each year thereafter. Many businesses have failed to submit these annual returns, and CIPRO has decided to play hardball.
And now for the ‘scare’ tactics!
Practice Note 106 of 2009, Annual Returns for Companies and Close Corporations was published to “assist customers with the lodgement of annual returns and the associated administrative processes.” But apart from a few reminders about the required steps companies must take to ensure compliance, the circular is full of bluntly worded threats.
CIPRO notes: Failure to lodge annual returns within the specified two-month period will result in a penalty fee being levied. Further failure to pay within a further period of six months will result in deregistration of the entity. The final deregistration of an entity means the withdrawal of its status as a separate legal entity. As it no longer exists it will be unable to function or transact within the economy. Further, the directors or members of the entity may be held personally liable to creditors for all outstanding liabilities, including mortgage bonds and other debts since all legal responsibilities remain fully enforceable as though the entity has not been deregistered. Lastly, all assets are forfeited to the state in terms of the common law principle and practice of bona vacantia.
We’re not legal specialists; but the above sounds suspect. As if to confirm the ridiculous nature of their threat, CIPRO follows the above with a more conciliatory piece: If an entity has been placed in deregistration due to its failure to comply with annual returns, the entity may continue to lodge its annual returns while in deregistration (special exemption from normal practice granted) without bringing a written application or objection to the Registrar. The system will automatically take the entity out of deregistration and restore it back to active. If the entity has been placed in deregistration due to another reason a written application or objection must be made to the Registrar for cancellation… They then describe how companies can have such deregistration rescinded, including a number of administrative hurdles and, of course, another R150 re-instatement fee.
Another ‘body of state’ specialising in problem transfer
Your annual return is only received once CIPRO has both return and payment. And they make it clear the onus is on you to ensure they have both. Their latest Practice Note suggests compliance could be tough. “Customers are strongly advised to lodge annual returns at the beginning of the due period… to limit possible inconvenience or problems that may be experienced during lodgement due to high volumes of compliance.” And of course you shouldn’t deposit your annual returns dues during the last two days of the month due to possible problems with inter-bank allocations of money to CIPRO… Further to this – lodgement can only be processed electronically online. Many have complained about this …
How much will it cost you? If your turnover is less than R10m then close corporations pay R100, private and incorporated companies R450, public companies R4000 and external companies R4000. The amount grows incrementally for higher turnover companies… Our advice to companies is to comply with the annual return requirement regardless of how pointless the process seems. The R100, R450 or R4000 per annum is a snip compared to the problems you could face for non-compliance.
Editor’s thoughts: We followed our own advice and submitted an annual return for on of our CCs over the week end. After a number of attempts (CIPRO wants your CC name and registration number exactly as reflected on their records) we finally stumbled on the payment verification stage. Credit card payments are validated during working hours only. We’d love to hear your comments on recent dealings with CIPRO? Add your comment below, or send it to gareth@fanews.co.za
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