The Companies and Intellectual Property Commission (CIPC) announced on 24 March 2020, that it will be closing down
all services relating to companies, close corporations and co-operatives as of 16:00 on 24 March 2020 until 1 April 2020. This is to allow the CIPC to finalise its year-end processes (brought forward to 31 March 2020) before the national lockdown, which commences at midnight on 26 March 2020, and ends at midnight on 16 April 2020 (Lockdown Period). Practically, this means that companies logging onto the CIPC's website will see a server error message from today until 1 April 2020.
CIPC also announced on 24 March 2020, that only limited electronic services will resume from 1 April 2020, with all other services only resuming at the end of the Lockdown Period. CIPC confirmed the limited services again on 1 April 2020.
CIPC services available during the Lockdown Period
The following limited electronic services will resume on 1 April 2020:
- filing of annual returns, together with annual financial statements or final accountability supplements;
- filing of compliance checklist;
- registration of a private company with a standard CIPC MOI without a name;
- issue of disclosure certificates;
- filing of financial year-end changes;
- filing of registered office changes;
- filing of auditor and accounting officer changes;
- filing of company name changes (if the name is already reserved); and
- requests for BBB-EE certificates.
CIPC services unavailable during the Lockdown Period
However, until the end of the Lockdown Period,
inter alia the following services will
not be available:
- registration of a shelf company;
- registration of a new company (other than a private company with a standard CIPC MOI and with no name reservation);
- registration of a non-profit company;
- registration of an external company;
- reservation of company name;
- reservation of defensive name;
- filing of amendments to MOI (this includes, among other things, increases or decreases to the authorised shares or other securities and conversion of one type of profit company to another type of profit company);
- filing of directors' reports on conversions of par value shares to no par value shares;
- filing of rules regarding the governance of the company;
- filing of notices if company records are not kept at the registered office or moved;
- filing of resolutions commencing or terminating business rescue proceedings, as well as those concerning the business rescue plan (see below further comments regarding business rescue proceedings);
- filing of a notice of voluntary winding-up of a company;
- conversion of a close corporation to a company;
- changes to directors;
- changes to company secretary;
- filing of the establishment of employee share schemes and certificates related thereto;
- filings related to offers to the public, including prospectuses and underwriting agreements;
- filing of notices of amalgamation or merger;
- changes to authorised representative;
- deregistration of company;
- re-instatement of company after deregistration; and
- filing of complaints with the CIPC.
Some of the important areas of impact of the limitation of CIPC services on companies
We caution companies that these measures may be relevant to their operations and corporate actions. For example, companies which may be considering urgent capitalisation by way of an issue of securities may not have sufficient authorised securities, requiring amendments to their MOIs. Many other corporate actions may also require amendments to MOIs. Companies will, during the Lockdown Period, either not be able to make electronic filings at all or if they are able to do so, will not receive acknowledgments of receipts of filings made to the CIPC. Companies may wish to consider other approaches to the practical implications of the CIPC's limited services during the Lockdown Period. Companies are advised to approach their corporate or legal advisers to explore the alternatives available, including whether, should the CIPC's email address for filings remain active during this time, submission in this manner (without being processed by the CIPC), would constitute filing under the Companies Act, 2008 (Act).
Business rescue proceedings
Under the Act business rescue proceedings initiated by the board of a company only commence once the resolution commencing business rescue proceedings has been filed with the CIPC. The announcement by the CIPC on 24 March 2020 deals specifically with business rescue and states that a general extension is provided for business rescue proceedings which commenced, but did not complete the procedure in section 129 of the Act, until 30 April 2020 and that, for business rescue proceedings that have not yet commenced in terms of section 129 of the Act, dies non will apply until 16 April 2020. The effect of this section of the CIPC notice is not entirely clear as yet. However, the suspension of the CIPC services identified above will amongst other things mean that no company can, during the Lockdown Period, be placed under business rescue following the passing of a resolution by the board of the company to that effect. Unless the CIPC makes this service available between 24 March 2020 until the end of the Lockdown Period (which it is not making available yet), no company board will be capable of commencing business rescue proceedings during this time. This limitation may be very relevant to a number of companies during this volatile period. Companies are advised to approach their corporate or legal advisers to discuss the implications and possible solutions, including whether, should the CIPC's email address for filings remain active during this time, submission in this manner (without being processed by the CIPC), would constitute filing under the Act.
It should be noted that, a voluntary winding-up of a company begins only when the resolution of the company to wind the company up has been filed. Unless CIPC makes this service available between 24 March 2020 until the end of the Lockdown Period (which it is not making available yet), no company will be capable of commencing winding-up procedures during this time. As with business rescue, this limitation on the voluntary winding-up of a company may be very relevant to a number of companies during the current volatile period. Companies are advised to approach their corporate or legal advisers to discuss the implications and possible solutions, including whether, should the CIPC's email address for filings remain active during this time, submission in this manner (without being processed by the CIPC), would constitute filing under the Act.
Changes to directors
Another concern is that directors' details cannot be updated during this time (both appointments and resignations), which may impact on companies' ability to make quick and effective decisions, effect necessary amendments and transact. Directors may get physically impacted by COVID-19 and companies may need to appoint or elect new directors or alternate directors speedily. Although companies can offline make changes to their boards (by passing the necessary resolutions and signature of consents to act as directors), for the sake of transparency and for disclosure certificates to be up to date (e.g. for tender purposes, broad-based black economic empowerment transactions and ratings, transactional opinions), this service should ideally remain in place during the Lockdown Period.
Late filing of annual returns
Companies should note that they will have until 30 April 2020 to file their annual return and compliance checklist if their due date falls during the Lockdown Period. The CIPC will not impose any penalties on companies until then. The CIPC's customers will however face penalties after 30 April 2020 if they file their annual returns late. The CIPC will also neither deregister companies and close corporations that fail to file their annual return, nor finally deregister companies or close corporations that are currently in deregistration process for failure to file their annual returns, until further notice. Companies which are due to file their annual returns outside of the Lockdown Period will need to comply with their original filing date and will not get any reprieve even if they are affected by COVID-19.
The CIPC released another practice note on 24 March 2020 in which it states that it will temporarily not invoke its powers under section 22 of the Act in relation to companies which are temporarily insolvent and still carrying on business or trading due to business conditions which were caused by the Covid-19 pandemic.
Section 22 empowers the CIPC, where it has reasonable grounds to believe that a company is carrying on business recklessly, with gross negligence, with intent to defraud any person or for any fraudulent purpose (prohibited conduct), to:
- issue a notice to such company to show cause why the company should be permitted to continue carrying on its business or to trade; and
- issue a compliance notice to such company requiring it to cease carrying on business or trading, if the company fails within 20 business days of a notice mentioned above to satisfy the CIPC that it is not engaging in prohibited conduct.
The effect of the CIPC's practice note is to suspend temporarily the exercise by the CIPC of its powers under section 22 of the Act. However, it does not absolve companies and boards from the requirements of section 22 not to carry on business recklessly, with gross negligence, with intent to defraud any person or for any fraudulent purpose (even in the present circumstances). In terms of section 77(3)(b) of the Act, a director is liable to the company for any loss, damage or costs arising as a direct or indirect consequence of him or her trading as prohibited under section 22 (and liable to any person who suffered damages under section 218).
The CIPC will revoke its practice note within 60 days after the end of the Lockdown Period.
The United Kingdom (UK) approach and approach made to CIPC
It is worth noting that the equivalent of the CIPC in the UK, Companies House, has put robust plans in place to maintain services for its customers and will therefore remain fully operational online during the UK lockdown.
In addition, if companies file their accounts late with the Companies House because they are affected by COVID-19, they can apply for an automatic and immediate three-month extension to file their accounts so that companies can prioritise managing the impact of COVID-19. Companies must apply for an extension before their filing deadline.
Webber Wentzel has reached out to the CIPC, for the CIPC to consider the possibility of reviewing the services which will be unavailable during the Lockdown Period in order to ease the burden on companies who may be affected by the current events.
(updated on 2 April 2020)