Get Rid of Business Debt
A company should consider liquidation when it is unable to pay its debts or when its liabilities exceed its assets. In such cases, the directors and shareholders can opt for voluntary liquidation. Additionally, a solvent company (one without debt) can also be voluntarily liquidated by its directors and shareholders.
Directors are not personally liable for the company’s debt unless they have signed personal surety agreements. In the absence of such agreements, the company’s debts are written off upon liquidation, and directors are not blacklisted or prohibited from being directors of other companies.
Yes, it is possible to restructure your business after liquidation so that it can continue in another format.
Upon liquidation, all company assets (if there are any) are sold. Any proceeds from the sale of the assets are used to pay creditors. Any remaining unpaid debt must be written off, as the company ceases to exist after liquidation, and creditors cannot claim the outstanding amounts from the dissolved entity.
Voluntary liquidation occurs when the directors and shareholders decide to liquidate the company, which can be done through the Companies and Intellectual Property Commission (CIPC) or the High Court. Compulsory liquidation is initiated by a creditor (or a director/shareholder in case of conflict) through a High Court application to have the company liquidated. Compulsory liquidation cannot be processed through CIPC.
Liquidation means that a company is voluntarily or compulsory liquidated, or otherwise described as “winding-up”. A liquidator is appointed to sell assets (if any), pay creditors and then the company is deregistered.
No. A company is a registered entity which is a legal person. Unless one company signed surety for the debt of another company, the creditors of a liquidated company cannot collect attach the assets of another company that the director owns if the other company.
An insolvent company can either be liquidated voluntary or it can be liquidated by a court order. The liquidation of a company is regulated by the Companies Act of 1973.
Once a company is liquidated, it is dissolved.
Liquidation can be used to restructure a company so that it can get rid of bad debt or problems. This will enable the company to continue to trade if it wants to, but then be rid of the problem (SARS debt included).
Yes, you can. There is nothing in our law that prohibits a director to be a director or shareholder of as many companies as is preferred after the liquidation of one (or more) companies.
The personal assets of a director are not affected by the liquidation of a company, because the assets are the property of the director and not that of the company. Creditors therefore cannot attach the personal assets of directors for the debt of the company.
The shareholders are the owners of a company and members are the owners of a close corporation. The shareholders and members cannot be held liable for the debt of the company unless they have signed personal surety for the debt of the company or close corporation.
You cannot sell company assets that are fully paid before liquidation, but it is possible to buy the assets back from the liquidator after liquidation. Financed assets have different rules that we can explain in a consultation.
SARS debt (except for customs and excise taxes) are written off in a liquidation. The company does not exist any longer so SARS cannot collect any debt from the company.
It is not a problem if the financial statements are not up to date.
When a company is deregistered, it is just deregistered at the CIPC, but SARS and other debt remain alive. If there is debt at the time of deregistration, the directors become automatically liable for these debts. If a company is liquidated it ceases to exist altogether and the debt of the company is written off.
A CIPC liquidation takes about one week then the company is liquidated. The liquidator’s winding-up process can take anything from 6 months to two years, as it will depend on what is going on in the company
A liquidator is a person who is registered on the national liquidators’ list at the Master of the High Court’s offices and is a person who is qualified to do liquidator’s work.
The liquidator will communicate with creditors, not the directors.
A liquidator must wind up the affairs of the company, meaning he must deal with assets, creditors, monies and comply with the Insolvency Act.
A liquidator must wind up the company which entails that he must, inter alia, deal with creditors, assets, monies while he reports to the Master. In other words, he brings the affairs of the liquidated company to an end.
A liquidator’s winding up of a liquidated company can take 6 months or longer depending on what happens in the insolvent estate of the company.
The liquidator will send a questionnaire and ask for all the financial information of the company, all books and lists of assets. It is not neccessary for financial statements to be up to date, he will work what is available.
The liquidator is the only one who can communicate with creditors, the directors may not.
The directors are liable to pay the liquidator’s cost.
We will give you bespoke legal advice to address your particular challenges so that you can make an informed decision
