Are you planning to liquidate your solvent company in South Africa? This can be a complex process, but with the right information and guidance, it can be done smoothly. We are experienced Commercial Liquidation Attorneys who will hold your hand through the process and you can rest assured that you will receive the correct advice and assistance.
In this blog post, we guide you through the process of liquidating a solvent company in South Africa. Follow the steps for a seamless solvent liquidation.
A company is solvent when it has no debt to pay.
There are some reasons why one would want to liquidate a solvent company. For example, if there were more than one director, they might want to liquidate the company to avoid any possible future claims either from each other or creditors. A company may have had an unknown history (for example when it was purchased) and to avoid the unknown the directors may want to liquidate the company if they do not know the full history of the company from date of registration.
Also, the directors may want to get rid of assets through a liquidator in which case one will liquidate the solvent company. The assets will be sold and the proceeds paid to shareholders after liquidation.
What are the steps to follow to liquidate a solvent company
Liquidating a solvent company requires planning and getting everything in place. Let us discuss the steps to follow.
Step One: Make the decision
All directors and shareholders should be in agreement that the solvent company be liquidated. If they are not, it can get complicated. Therefore first discuss the liquidation with all the shareholders and directors and make a unanimous decision. If this can be reached, it will be a voluntary liquidation which is the best scenario to have as it will save on legal cost and effort.
Step Two: Prepare a resolution to liquidate
The next step is to prepare a resolution to liquidate the company. This resolution must be approved by the shareholders of the company and also signed by all the directors.
Step Three: Lodge the resolution with CIPC
Once the resolution has been approved, it must be lodged with the Companies and Intellectual Property Commission (CIPC) together with other supporting documentation that we will draft. The CIPC will issue a notice of acceptance of the resolution. As soon as the Resolution is registered, the company is liquidated.
Step Four: A liquidator is appointed
The Master of the High Court appoint a liquidator. The latter will be responsible for winding up the solvent estate of the company. This means that apart from his administrative duties, the liquidator must sell assets (if any), dispense the proceeds to shareholders. Thereafter the liquidator will report to the Master, who will file a notice at the CIPC that the company is finally liquidated. CIPC will deregister the company and it will not exist any longer. The liquidator must be a registered practitioner and licensed by the Master of the High Court.
Step Five: Advertise the liquidation
After the company was liquidated and a liquidator appointed, the liquidator must advertise the liquidation in the Government Gazette and a local newspaper in the area where the company is registered.
Step Six: Notify all creditors and stakeholders
The liquidator must notify all creditors and stakeholders of the liquidation. Creditors must submit their claims to the liquidator, who will then evaluate and prioritize them.
Step Seven: Realize the assets
The liquidator must realize all the assets of the company and distribute the proceeds to the shareholders.
Step Eight: Finalize the liquidation
Once all the assets have been realized and the proceeds (if any) have been distributed to the shareholders the liquidator must submit a final liquidation and distribution account to the Master of the High Court.
Conclusion
Liquidating a solvent company in South Africa can be a complex process, but with the right guidance, it can be done smoothly. The key is to appoint a qualified and experienced liquidator who can guide you through the process and ensure that everything is done in compliance with the law. If you are considering liquidating your solvent company contact us so that we can assist you with the best legal advice.