Liquidation in South Africa is a formal process used to close a company and address its financial obligations. This guide provides business liquidation advice, explains the company liquidation process in South Africa, and answers common questions like how do I liquidate a company or when can you liquidate a company.
What Does Liquidation Mean?
Liquidation refers to the process of winding up a company’s affairs. During this process, the company’s assets are sold to settle its debts, and any remaining surplus is distributed to shareholders. The liquidation process can either be voluntary or compulsory.
Who Can Liquidate a Company?
According to Section 346 of the Companies Act 61 of 1973, the following parties can initiate the liquidation of a company:
Directors and Shareholders
- Directors and shareholders can voluntarily liquidate their business if they all agree. This is initiated by passing a resolution, which can be filed either with the Companies and Intellectual Property Commission (CIPC) or through a High Court application. A company can be solvent or insolvent if it wants to liquidate voluntarily.
- Disagreement Among Directors or Shareholders:
If not all directors or shareholders agree to liquidate, the ones who want to liquidate the company can apply for compulsory liquidation through the High Court.
Creditors
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Creditors can apply for liquidation if the company owes them money that is not being paid. This compulsory liquidation process in the form of a liquidation application where the creditor is the Applicant filed with the High Court, not the CIPC. Liquidation allows for a liquidator to be appointed so that the company’s assets (if any) can be sold and the proceeds distributed amongst creditors.
When Can You Liquidate a Company?
A company can be liquidated in several circumstances:
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- Insolvency: When the company’s liabilities exceed its assets or it cannot pay its debts.
- Solvent Liquidation: Even if the company is solvent, it can opt for voluntary liquidation to stop trading.
- Creditors’ Liquidation: When creditors initiate the liquidation process to recover debts owed by the company.
Business Liquidation Advice from Experts
As a seasoned liquidation lawyer with 17 years of experience, I have successfully assisted businesses through every stage of the liquidation process in South Africa. Whether you need help understanding how to liquidate a company or require professional liquidation services, we are here to guide you.
If you are ready to start the process, contact us today for expert advice on voluntary liquidation, compulsory liquidation, or handling SARS debt through liquidation
