32. Default in complying with requirements as to private companies

Question 1

32. Default in complying with requirements as to private companies

Answer 1

General overview
[32.01] This section deals with private companies that have lost their private status and thereby become a public company. Chiefly, this happens through the loss of the restriction on transfer of shares and where the membership exceeds 50 members. In such a case, subsection (3)(c) provides that the company shall, within a period of 14 days, after the registrar’s notice or court order, lodge with the registrar a statement in lieu of prospectus and a declaration in the prescribed form under s 62(2)(b).

Question 2

Cessation of private company

Answer 2

[32.02] Section 32(2) provides that where a private company has defaulted in complying with s 18(1)(b) (i.e. more than 50 members); or its constitution has been altered to remove the restriction on the transfer of shares; or if it has ceased to have a share capital, the registrar shall serve a notice on the company stating that it has ceased to be a private company as from a certain date.

Question 3

Status to remain

Answer 3

[32.03] A private company that has converted into a public company under s 32 shall not be reconverted back into a private company, without leave of the court.

Question 4

Appeal to the court

Answer 4

[32.04] Subsection (4) allows the court to determine that the company remains a private company if the default or alteration referred to in s 32(2) was obtained either accidentally, by inadvertence or due to some other sufficient cause, or on some other grounds where it is just and equitable to grant relief.