The Mineral and Petroleum Resources Development Act (MPRDA) ushered in an approach to mining and prospecting rights that aims to strike a balance between economic efficiency, sustainable economic and social development and equitable access to mineral resources. The Companies Act also seeks to locate economic activity within a constitutional and sustainable development context.

However, beyond these broader objectives, both pieces of legislation aim to regulate the mechanics of establishing and running mining and related operations.

“Therefore, it is essential that these laws provide certainty as to the processes and procedures relating to the entities engaged in mining operations, their legal obligations and the consequences thereof,” states law firm Baker & McKenzie associate Janine Howard and candidate attorney Nina Braude.

They point out that one of the obligations of “all companies” under the Companies Act is to file an annual return with the Companies and Intellectual Property Commission (CIPC).They highlight that failure to do so for two or more successive years is grounds for the CIPC removing the company from the Companies Register.

“This obligation is designed to confirm the company’s continued existence and that it remains in business and/or trading. There is an underlying presumption that only companies which serve a legitimate economic purpose should remain recognised as juristic entities,” Howard and Braude explain.

The lawyers note that, if a mining company fails to submit its annual returns for two consecutive submission periods, fails to remedy the omission and cannot provide good reasons for such failure, it will be subject to deregistration by the CIPC.

They comment that the effect, in accordance with Section 56(c) of the MPRDA, is that such company’s mining and/or prospecting rights, permits or permissions will automatically lapse.

“The difficulty with this is that Section 82(4) of the 2008 Companies Act provides that, in the event of deregistration by the CIPC for, among other reasons, failure to comply with the obligation to submit annual returns, any interested person may apply . . . to reinstate the registration of the company,” the pair point out.

The lawyers highlight that two issues become relevant on reinstatement of registration, namely whether the reregistered mining company can have its lapsed mining and/or prospecting rights restored and the implications for the property rights of third parties who may be adversely affected by the restoration of such rights.

However, only the first issue is discussed in this piece. The possible implications of a company’s reregistration on third parties are therefore not considered.

The question of the impact of the restoration of mining and/or prospecting rights on reinstatement recently came before the Supreme Court of Appeal (SCA) in the case of Palala Resources vs Minister of Mineral Resources and Energy. A prospecting right was granted to Palala on May 20, 2009 and was valid to May 19, 2011. As a result of a failure to submit annual returns, Palala had its company registration cancelled in terms of Section 73(5) of the 1973 version of the Companies Act on July 16, 2010.

Howard and Braude says that, through the mechanisms provided in Section 73(6A) of the 1973 Act, Palala was able to restore its registration just over two months later. Nonetheless, the prospecting right remained valid during this period.

Towards the end of 2010, a third party known as Hectocorp lodged an application for prospecting rights relating to the piece of land over which the prospecting right was held. Notwithstanding Palala’s objecting to this application, it was accepted by the Department of Mineral Resources (DMR) on the basis that Palala’s prospecting right had lapsed at the time of its deregistration.

“On a strict reading of Section 56(c) of the MPRDA, this was correct. However, the DMR failed to address the consequence of Palala having been reregistered in terms of Section 73(6A) of the 1973 Act,” elaborate the pair.

What followed the DMR’s decision was a series of appeals by both Palala and Hectoprop, first in terms of the MPRDA’s administrative appeals provisions and later in the courts. Eventually, the SCA found on May 30, 2016 in Palala’s favour that the reregistration of a legal entity in terms of Section 73(6A) of the 1973 Act has retroactive application as a result of the deeming provision contained therein. Therefore, when Palala was reregistered, its assets, including the prospecting right, reverted to it as if it had never been deregistered.

Howard and Braude comment that Section 82(3) of the 2008 Companies Act is, broadly, the equivalent of Section 73(6A) of the 1973 Act.

“Critically, however, the 2008 Companies Act’s provision for reregistration has excluded the ‘deeming’ provision which lay behind the Palala decision. It is, however, possible to apply the court’s reasoning to the 2008 Act if regard is had to the 2015 case of Newlands Surgical Clinic (Pty) Ltd v Peninsula Eye Clinic.

“The Newlands case expressly considered whether Section 82(4) of the 2008 Act had retroactive application in the context of corporate activities during the period between deregistration and reregistration. Notwithstanding the narrow scope of the case, the SCA addressed the question of retroactive implications of reregistration with reference to property (which would include mining and/or prospective rights).”

The Newlands court found that, despite the absence of the deeming provision from Section 82(4), the section has the effect of revesting the company’s property automatically on reinstatement of the company to the Companies Register. The court also stated that, in the case of a re-enactment of a provision which has language inserted or omitted, it can be presumed that any such additions or omissions are deliberate expressions of legislative intent.

The lawyers comment that the effect of reading Palala together with Newlands is that the consequences of a reregistration of a company in terms of Section 73(6A) of the 1973 Act may be extended to a company which is reregistered in terms of Section 82(4) of the 2008 Act, at least insofar as this applies to its property.

“Consequently, if a company is deregistered in terms of Section 82(3) of the Companies Act and, if such company is subsequently reinstated in terms of Section 82(4), it will automatically regain its property, including its mining and/or prospecting rights.

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