ACQUISITION OF IMMOVABLE PROPERTY BY FOREIGN COMPANIES / EXTERNAL COMPANIES

TO ALL ESTEEMED BUSINESS PARTNERS

Number

34/2016
An “external company” is defined in section 1 of the Companies Act 71 of 2008 as “a foreign company that is carrying on business, our non-profit activities, as the case may be, within the Republic, subject to section 23(2)”

In terms of section 23(1) of the Act an external company must register with CIPC to conduct business or non-profit activities, as the case may be, within the Republic as an external non-profit company or an external profit company.

A foreign company must, for the purpose of section 23(1) and the definition of “external company”, be regarded as “conducting business, or non-profit activities, as the case may be, within the republic” if that foreign company-
  • Is a party to one or more employment contracts within the Republic; or
  • Subject to subsection (2A), is engaging in a course of conduct, or has engaged in course or pattern of activities within the Republic over a period of at least six months, such as would lead a person to reasonably conclude that the company intended to continually engage in business or non-profit activities within the Republic (section 23(2))
When applying section 23(2)(b), a foreign company must not be regarded as “conducting business activities, or non-profit activities, as the case may be, within the Republic” solely on the ground that the foreign company is or has engaged in one or more of the activities referred to in the said section.

Uncertainty prevails in terms of section 23(2), read with section 23(2A), whether a foreign company can acquire immovable property or be a mortgagee without being registered as an external company. Registrars’ Conference Resolution 47 of 2011, therefore, provides that a foreign company can acquire property or act as mortgagee, provided the conveyancer provides the registrar of deeds with documentary evidence (for example an auditors certificate of affidavit from a director of such foreign company) to the effect that the company need not register as an external company, in terms of section 23(2) of the Act.

Conclusion

Where conclusive proof is provided that a foreign company is not conducting business activities in the Republic, such foreign company may acquire immovable property or act as a mortgagee, without registering with CIPC as an External Company.

For any queries please contact our property law division at the details below:

Allen West
Tel: 012 425 3549
awest@macrobert.co.za

Daleen Loubser
Tel: 012 425 3489
dloubser@macrobert.co.za

Disclaimer: This newsflash is for general information only and should not be used as legal or professional advice. No liability can be accepted for any errors or omissions, nor for any loss or damage arising from reliance and any information therein