Written by M Snyders
22 April 2022

WHAT IS LIQUIDATION?

A company or close corporation will be subjected to the liquidation process where business restructuring or business rescue is not possible. Liquidation of a company involves the sale of the company’s assets and the distribution of the proceeds from the sale of the assets to the creditors. During the sale and distribution process, the company has to refrain from all business activities.

WHAT IS VOLUNTARY LIQUIDATION?

Voluntary liquidation occurs when the shareholders, board of directors or members of the company agree that the company cannot pay its creditors and that the company should therefore be liquidated. If an agreement has been entered into amongst the shareholders or directors, this resolution must be filed with the Companies and Intellectual Properties Commission with a prescribed notice and fee.

WHAT IS THE ROLE OF THE MASTER OF THE HIGH COURT?

The filed resolution should also include notification to the Master of the High Court that security has been organised to settle the company’s debts within 12 months after the winding up of the company has commenced.

WHAT IS A COURT-ORDERED LIQUIDATION?

A court-ordered liquidation is a court application that has initiated liquidation proceedings. The court application can be initiated by the company’s creditors, the company itself, or its shareholders. If the application made by either the shareholders, board of directors or the creditors has been accepted, a provisional liquidation order will be granted. Once the order is granted, the company’s creditors will be notified of the liquidation application. The creditors are notified as they are given an opportunity to object to the application.

WHAT ARE THE LEGAL RAMIFICATIONS OF LIQUIDATION?

  1. The business will cease to exist.
  2. The directors will no longer hold any powers in the business.
  3. Employees will be retrenched.
  4. A creditor may not pursue further legal action against the company.

The liquidation of a company will be carried out in accordance with the Companies Act No 61 of 1973. Burger Huyser Attorneys can assist in initiating proceedings and winding up your company. Contact one of our commercial lawyers specialising in the liquidation of a company and who can assist you with winding up your company.

DISCLAIMER: Information provided in this article does not, and is not intended to constitute legal advice. READ MORE