We humans are forgetful creatures. Wedding anniversaries. The birthdays of significant others. Turning the clock back at the end of daylight saving. Turning off the iron. Yes, we’re forgetful of many things. But forgetting to file annual returns with the Companies Office is something that really stands out. That’s because, when you forget to file annual returns, things get messy. Thankfully, we’re here to tidy things up.
On occasion, we work with people who form a company to own a property. However, some of them forget to file annual returns to the Companies Office. When an annual return isn’t filed, the Registrar removes the company from the register. That’s a big price to pay for forgetting something.
Technically, when it is removed from the register, the company ceases to be a legal entity. Any property it owns is vested in the Crown. In reality, the property has a defunct company listed as the registered owner.
So, when the people in the company decide to sell their property, they run into a stumbling block. They realise their company isn’t a legal entity. Technically, their company doesn’t even own that land, and they can’t enter into a binding contract to sell the land.
We don’t want this to happen to you. So, if you’ve formed a company for property ownership purposes, here’s what you can do to avoid dramas, especially during the sale process:
- File an annual return, or have a reliable accountant do it for you
- Before listing a property for sale, agents need to check the Companies Register – https://companies-register.companiesoffice.govt.nz/ to:
- Confirm the company is registered
- Check the annual return is up to date (the company won’t be removed during your listing!)
- Check you’re dealing with the directors
If the company is removed from the register, don’t panic. It can be fixed. WE can fix it. But it will cause a delay in your sale process.
The client, or, more often, their accountant, can apply to have the company restored to the register. This is not a difficult process, but all good things take time – in this case, up to six weeks.
If you’ve got a signed Sale & Purchase Agreement, that means the vendor won’t be able to settle until that process is completed. Only once the company is restored can directors sign the transfer documentation with their lawyer.
During the restoration process, the vendor and purchaser are both in an uncomfortable limbo. Imagine a game of Twister with your Aunt. That’s how uncomfortable this can be. Either party can technically pull out because the validity of the contract isn’t clear. That’s why it’s best to get this process sorted before entering into a Sale and Purchase Agreement, rather than making an agreement conditional on the company being restored.
We’ll happily talk with you about the importance of filing an annual return with the Companies Office, or the process involved in restoring a company. Make a note to chat with us. Write it in your diary, just in case you forget.