Deregistration of Share Block Companies

Deregistration of Share Block Companies

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DEREGISTRATION OF SHARE BLOCK COMPANIES

There are still a large number of Sectional Title Bodies Corporate which have a Share Block component, being those units which have never been converted to Sectional Title  following the opening of a Sectional Title Register. There are also, of course, buildings which have never opened a Sectional Title Register and which are therefor still entirely Share Block in nature.

In a fairly recent development, the Companies and Intellectual Property Commission (CIPC)  has begun a process of automatically deregistering Companies (including Share Block Companies) which have failed to submit their Annual Company Return. Submission of, and payment of this Return is a legal requirement and the CIPC is within its rights to deregister Companies which fail to adhere to the law.

We are aware that a number of Bodies Corporate which have Share Block components have chosen to ignore this requirement especially where there are only a few unconverted units. In some circumstances, they have even failed to hold Annual General Meetings of the Share Block Company or to have Annual Financial Statements prepared and audited in contravention of the Share Blocks Control Act.

The motivation for virtually ignoring the existence of the Share Block Company has usually been that the Body Corporate is unwilling  to bear the cost of complying with the legal requirements for the benefit of a small number of Share Block owners. Schemes which Wakefields Property Management administer have always, at our insistence, complied with the legal requirements.

The problem that is now surfacing in the Property Management industry is that once a Company is deregistered, the transfer or cancellation of shares cannot take place, which effectively  prevents persons owning units still under Share Block from selling their unit or converting it to Sectional Title. To make matters worse, the process of restoring a deregistered Share Block Company is arduous, lengthy and probably costly, requiring  (amongst other  things) consent from the Department of Public Works and National Treasury as well as documentary proof that the Company was indeed in business at the time of deregistration or that it had any outstanding asset or liabilities. This latter requirement implies that up to date Annual Financial Statements will need to be prepared  and audited.

Clearly the Directors of Share Block Companies have a significant duty to ensure that deregistration of the Company is avoided at all costs.

Author: Wakefields Property Management