Why a company’s registered address matters

Why a company’s registered address matters

By Jerome Veldsman

Praetor and Geothermal Energy Systems (Pty) Ltd v Aqua Earth Consulting, a decision of the High Court, Cape Town on 15 February 2017, was an application by Mr Praetor and his company (Geothermal) for the rescission (setting aside) of a Court order placing Geothermal in liquidation.  Aqua Earth had in an underhand manner obtained the order placing Geothermal in liquidation without the latter being aware thereof.  Hence the present application.

In order to succeed with the rescission application, Geothermal had to prove both of two essential elements:

–    that it had a reasonable and acceptable explanation for not defending the liquidation application; and

–     that it had a bona fide (in good faith) defence.

Geothermal did not defend the liquidation application because the company had not been aware of the liquidation application.  Aqua Earth had served the Court documents at the registered address of Geothermal, in circumstances where it was known to Aqua Earth that it was unlikely that Geothermal would receive notice of the documents.

Why so?  To the knowledge of Aqua Earth, Geothermal’s registered address was that of the company’s auditor, and the auditor had advised Aqua Earth that it had no contact details for Geothermal/Mr Praetor.  Mr Praetor had also instructed the auditor not to accept service of documents for the company.  The Judge noted: “The reason for this bizarre decision has not been explained.”

However, in law, Court documents may be served on a company at its registered office.

So, Geothermal failed on this essential element:

It is not a reasonable and acceptable explanation for Geothermal to say it did not receive notice of the application because it deliberately, but for unexplained reasons, instituted measures that rendered its registered office ineffectual for its statutory purpose.

Geothermal had a solid defence against the liquidation application.  The Judge even commented that the liquidation application should have been dismissed, based on Aqua Earth’s version alone.  But that did not save Geothermal, as it failed on the other essential element.

Perhaps Geothermal could successfully have relied on the constitutional right of access to Court, but seemingly its legal practitioners did not make this argument.

As an aside, under the (new) Companies Act, the (old) practice of using a company’s auditor’s address as the registered address of the company is unacceptable.  A company must maintain its own office, and register the address of that office with CIPC; and if a company has more than one own office, it must register its principal office with CIPC.

Also in this issue:

Chairman’s Introduction

More quotes from Nietzsche

The right to die and human dignity

When your travel agent makes you ill

The ingenuity of fraudsters

The Companies Act shows its teeth

POPI and debt collection

Burning the American flag