Newlands Surgical Clinic Proprietary Limited (the "Appellant") and Peninsula Eye Clinic Proprietary Limited (the "Respondent") were involved in arbitration proceedings regarding a dispute pertaining to a sale of shares agreement entered into between the Appellant and the Respondent (the "Sale of Shares Agreement").  The arbitrator found in the Respondent's favour and ordered, amongst other things, the Appellant to provide the Respondent with the shares forming the subject matter of the Sale of Shares Agreement.

It subsequently came to the Respondent's attention that, before the arbitration proceedings had commenced, the Appellant had been deregistered.

The Respondent made an application to the Companies and Intellectual Property Commission ("CIPC") for reinstatement of the Appellant's registration on the companies register. After CIPC approved such application and reinstated the registration of the Appellant, the Respondent brought an application to the Western Cape Division of the High Court, Cape Town (the "High Court") for i) an order affording the reinstatement retrospective effect so as to validate the arbitration proceedings during the period of the Appellant's deregistration and ii) an order declaring the arbitration awards to be orders of court.

The High Court granted both orders and the Appellant brought an appeal against the High Court's decision in the Supreme Court of Appeal ("SCA").

The appeal in the SCA involved the interpretation of s 82(4) of the Companies Act 71 of 2008 (the "Act") as juxtaposed with s 83(4) of the Act.  S 82 of the Act pertains to dissolution of companies and their removal from the companies register and s 83 of the Act pertains to the effect of removal of a company from the companies register.

In terms of s 82(4) of the Act, if CIPC deregisters a company in terms of s 82(3) of the Act, any interested person may apply to reinstate the registration of the company.  In terms of s 83(4) of the Act, at any time after a company has been dissolved, any person of interest in that company may apply to a court for an order, amongst other things, declaring the dissolution to have been void and, if the court declares the dissolution to be void, any proceedings may be taken against the company as might have been taken if the company had not been dissolved.

The questions for consideration by the SCA were the following:

1.     whether the reinstatement of a company by CIPC under s82(4) of the Act (i.e. reinstatement by way of     administrative action by CIPC) operated retrospectively so as to validate actions performed on behalf of the company during the period of its deregistration; and
2.     if the answer to the first question was in the negative, whether the reinstatement could be afforded such retrospective effect by a court in the exercise of its powers in terms of s 83(4) of the Act and, in that manner, validate activities performed on behalf of the company during the period of its deregistration.
If the actions performed on behalf of the company could not be validated with retrospective effect in either of the manners referred to above, this would have the effect that the arbitration proceedings, court proceedings and the orders and awards made in favour of the Respondent against the Appellant would be null and void.  On the other hand, if such actions could be validated with retrospective effect, such proceedings, orders and awards would stand.

Findings and reasoning of the SCA:

• The SCA found that s 82(4) of the Act had automatic retrospective effect, not only in revesting a company    with its property but also in validating its corporate activities during the period of its deregistration.
• It thus followed that the arbitration proceedings and related court proceedings during the period of deregistration of the Appellant, together with the awards and orders made in those proceedings, were automatically validated by the reinstatement of the Appellant under s 82(4) of the Act.
• The SCA also found that there was no reason to restrict the wide meaning of s 82(4) of the Act so as to exclude from the ambit of the section a company which had, subsequent to dissolution, been reinstated by administrative action by CIPC.
• The court thus dismissed the appeal with costs and confirmed the judgment of the High Court, subject to certain amendments being made to the order issued by the High Court.
• The court's reasoning was that the refusal to validate the corporate activities of a company during its period of demise could be devastating to the interests of bona fide third parties who were unaware of the deregistration.
• The court also held that third parties were given the opportunity to prevent such reinstatement to the extent that they objected to it and/or could be potentially prejudiced by it. The SCA was of the view that this would ameliorate the potential prejudice to such third parties.

In conclusion, where an application is made for reinstatement of a company on the companies register and it is successful, such reinstatement can apply with retrospective effect, not only in revesting the company with its property, but also in validating corporate activities that were performed on its behalf during the period of its deregistration. This is the case not only where such reinstatement is by order of court but also where reinstatement is done by way of administrative action by CIPC in accordance with s 82 (4) of the Act.

Written by Lischa Gerstle and Joanne Ripley-Evans, Partners at Bowman Gilfillan Africa Group