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We form and sell shelf companies, so I guess that it is not surprising that we occasionally get a call from someone who wants to sell their dormant company to us. The answer is always “No”. Why? Because we do not know for certain that the company was always dormant. It could have some nasty skeletons in the cupboard.

Skeletons

Sure, we can check on its tax and CIPC status, but that’s about all.

Companies are often asked to sign surety against a dept of the shareholder and that is the scarey one because it would be impossible to trace. The first that a new shareholder would know would be when the creditor obtained judgement against the company.

It used to be fashionable to buy companies that had assessed losses and then work that loss into the buyer’s other, more profitable company. Not a good idea. Firstly because it is tax evasion, and secondly because of those hidden contingent liabilities.

So if you have a dormant company, you have a problem that you can’t easily get rid of. SARS expects 2 provisional and one annual tax return each year, is imposing administrative penalties of R250 per month per outstanding annual return, and will not make the company dormant for tax unless it has been de-registered.

Your best bet is to stop submitting annual returns to CIPC and then wait until they de-register the company due to non-submission (this can take four or more years). Then take that proof of deregistration to SARS and deregister the company as a taxpayer.

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