Article provided by InfoDocs
At some point, you may need to shut down your business or bring a deregistered company back to life. Knowing how company deregistration and reinstatement work is essential to ensure you’re making informed decisions about your business’ future.
What happens when a company is deregistered?
Deregistration isn’t just a technicality – it has real financial and legal consequences for your business. Once your company is removed from CIPC’s records, it no longer exists as a legal entity, meaning:
- Your business bank accounts may be frozen or closed. Banks require a company to be in good standing to maintain accounts. If your company is deregistered, you may suddenly lose access to funds, payroll, and essential financial transactions.
- Contracts and agreements become void. If your company is deregistered while in the middle of a contract (with a client, supplier, or even a lease agreement), those contracts can become unenforceable. You might lose deals, face legal action, or struggle to recover payments.
- Business assets may be forfeited. A deregistered company cannot legally own assets. This means that company-owned property, vehicles, or even intellectual property may become state-owned or require expensive legal action to recover.
- You may be personally liable for company debts. If a company is deregistered with outstanding debts, directors and shareholders may be held personally responsible for repayment. Creditors can sue individuals directly, putting personal assets at risk.
Example:
Renay, an entrepreneur running an import-export business, assumed that skipping her annual returns for a year wouldn’t be a big deal. Her company was automatically deregistered, but she didn’t notice until her business bank account was frozen, leaving her unable to pay suppliers. By the time she applied for reinstatement, she had lost a major client and spent thousands on penalties and legal fees.
How to avoid this:
Deregistration is not automatic – CIPC issues warnings before taking action. But if ignored, it can be costly and time-consuming to fix. The easiest way to avoid deregistration is to stay compliant with annual filings. InfoDocs helps you track deadlines, submit filings on time, and ensure your company stays active.
Voluntary deregistration
Sometimes, a business outlives its purpose. If you no longer need your company and want to close it properly, you can apply for voluntary deregistration. To qualify, your company must:
- Have no outstanding liabilities (debts, loans, or obligations).
- Have no active business operations.
- Ensure that all CIPC filings, including annual returns, are up to date.
Once submitted, CIPC reviews the application and, if everything checks out, your company will be removed from the register. This is often the best option for business owners who no longer need the company but want to avoid future compliance requirements.
Involuntary deregistration (Oops, what now?)
If your company is deregistered while it still has outstanding liabilities, directors or members may be held personally liable for any debts or legal actions incurred during the period of deregistration. This means that creditors can pursue directors individually, making it critical to either keep the company compliant or properly close it through voluntary deregistration.
If your company stops filing annual returns, CIPC assumes it’s no longer active and will eventually deregister it. This can be a nasty surprise, especially if you planned to continue operating. The process is not immediate- CIPC issues warnings before taking action, but if ignored, deregistration is inevitable.
Many business owners only realise their company has been deregistered when they try to open a business bank account, sign a contract, or access company assets. At that point, reinstatement is the only solution.
Reinstating a deregistered company
If your company was deregistered but you want to get it back on track, you’ll need to apply for reinstatement. Here’s what that involves:
- Submitting a formal request to CIPC.
- Settling any outstanding annual returns and penalties.
- Providing proof that the company still has assets or intends to trade again.
- Submitting supporting documents, which may include financial statements or resolutions from shareholders.
If the company held assets at the time of deregistration, you may also need legal documentation to reclaim them.
The process can take weeks (sometimes months), but InfoDocs simplifies it by helping you manage outstanding compliance requirements and ensuring everything is in order before submission.
The cost of non-compliance
Deregistration isn’t just an inconvenience; it can cost you time, money, and business opportunities. Instead of dealing with frozen bank accounts, voided contracts, and expensive reinstatement fees, the simplest and most affordable solution is to stay compliant from the start.
Reinstating a deregistered company is not a quick fix. The process involves administrative hurdles, legal documentation, and costly fees. The longer a company remains deregistered, the more complicated and expensive the process becomes.
In contrast, filing annual returns and keeping your company records updated takes just minutes with InfoDocs. Businesses that plan to continue operating, even in the future, should stay compliant to avoid unnecessary reinstatement costs.
Stay compliant, stay in business – let InfoDocs handle it for you.
What’s next?
Whether you’re closing a company or bringing one back, compliance plays a huge role. In our next article, we’ll cover Dormant companies: how to keep a non-trading business compliant – because even if your business isn’t active, you still have responsibilities.
Need help with deregistration or reinstatement? InfoDocs makes it easy. Get started today at InfoDocs.