A lot of South Africans aspire to become successful entrepreneurs and take that important first step of registering a company with the Companies and Intellectual Property Commission (CIPC). But then life gets in the way and what was once a brightly shining star quickly becomes nothing more than a mere registration number and annual admin exercise. So, do you just forget about that dream and leave it there for “one day”? Or is there something else you can do? Of course, there is. Company deregistration – the smart way to throw in the towel.

Getting to the point of deregistration

I know a lot of people will see the deregistration of a company as a form of failure, but it isn’t. In fact, it’s realising and accepting that a business venture didn’t perform as expected. There exist mainly two ways in which any business owner would get to the stage where considering business deregistration would become a viable and smart option. Either the company never traded and was left on the shelf to collect dust from day one, or the company did trade, but due to various possible reasons stopped trading. Either way, the company is not operational.

Deregistration options

There are two options to consider regarding the deregistration of a company – Automatic Deregistration and Voluntary Deregistration.

Automatic Deregistration is initiated by the CIPC once a company fails to file two or more annual returns and once five annual returns become outstanding, the CIPC will deregister the company. Thus, it can take up to 5 years for a company to be automatically deregistered.

Voluntary Deregistration can be initiated by the duly authorized representative of the company in writing to the CIPC, hence the company has ceased business operations and has no or negligible assets for liquidation and all annual return filings are up to date. This way of deregistration typically takes about 4 months to complete. As of 1 July 2022 any company with the status of AR Deregistration (in process of being automatically deregistered) can apply for Voluntary Deregistration.

What about SARS?

Of course, trading and non-trading companies are subject to various taxes, where applicable, and all tax returns should be up to date and all debt with SARS settled before initiating the Voluntary Deregistration process. Once the deregistration process has been completed with the CIPC, the company then has to inform SARS of the deregistration and request all tax types to be deregistered. Failing to do so may result in penalties arising that could have been avoided. It is also best practice to inform all other entities where the company may have been registered for legislative and other purposes of the deregistration, to ensure a smooth deregistration process on all fronts and prevent any future administrative issues arising.

The best option

When it comes to company deregistration there is a clear and outright winner – Voluntary Deregistration. Except for saving you time and money as you don’t have to submit and pay any future returns with the CIPC or SARS, it also lowers your risk and exposure to claims that could be made against the company. As a company owner/director you can be held viable for claims made against the company. So why take that risk for a company that isn’t trading? Do the smart thing and voluntarily deregister the company. It’s smart and safe, and just remember, you can always register a new company in the future when the opportunity arises.

And if deregistration sounds like too much of a hassle for you, contact us, and we’ll assist you every step of the way to ensure a hassle free Voluntary Deregistration.