Company Liquidation

1. Through the court

You get a court order that puts the business or close corporation into liquidation; these orders are hard to overturn or revoke.

All parties involved in this procedure will be notified and given the chance to provide justification for why the business or close corporation shouldn’t go into liquidation. There won’t be many or any returns when we receive the final order. The completion of a liquidation by court order typically takes eight weeks. The price for a (Pty) is around R40,000 plus VAT, and for a CC, it is approximately R30,000 plus VAT. This is an all-inclusive fee that covers all other expenses as well as sheriff, advocate, and advertising fees.

2. By resolution submitted to CIPC (Voluntary) and signed by the members or shareholders

There is a small risk associated with the second alternative because interested parties are not informed of the voluntary liquidation.
As a result, by contacting a court, any interested person may set aside the liquidation. This option costs R19900 and takes two to four weeks to finalize.

The Master of the High Court must appoint a liquidator in each case. Normally, he charges ± R15000 for winding up the company (if there are no assets to sell to pay his fees).

Creditors vote to choose the liquidator.

When a company is liquidated, it goes through a legal process to close its operations.

This liquidation process involves selling all the company’s assets to pay off creditors.

Any remaining funds, if applicable, are distributed to shareholders. Once this is complete, the company ceases to exist as a legal entity. In South Africa, this liquidation procedure is handled either voluntarily by the company’s shareholders or through a court order initiated by creditors when the company cannot pay its debts.

The liquidation of a company refers to the formal process of winding up its operations.

During this process, the company’s assets are liquidated, meaning they are sold off to settle outstanding debts and obligations.

In company liquidation South Africa, this can be voluntary (initiated by the company’s shareholders or directors) or compulsory (initiated by creditors through the court).

The ultimate goal is to fairly distribute the company’s remaining assets and ensure legal compliance before the company is dissolved.

In South Africa, when a company undergoes liquidation, it signifies that it cannot pay its debts and must cease operations.

The company liquidation South Africa process begins with either a court order or a voluntary resolution by the shareholders.

A liquidator is appointed to manage the liquidation procedure, ensuring creditors are paid from the sale of the company’s assets.

Once the debts are settled and the legal requirements are met, the company is deregistered with the Companies and Intellectual Property Commission (CIPC) and officially ceases to exist.

When a company goes into liquidation, creditors are paid in a specific order of priority.

Secured creditors (those with collateral) are typically paid first, followed by preferential creditors like employees owed salaries.

Unsecured creditors and shareholders are paid last, and often only if funds remain.

Unfortunately, in many cases, unsecured creditors may not recover their full amount or anything at all. The liquidation process is designed to ensure fairness, but recovering money depends on the value of the company’s assets and the total debts owed.

Under Section 4(1)(a) of the Companies Act, 2008, a company or close corporation is considered solvent when it passes the solvency test. This means:

• All foreseeable financial circumstances of the business have been reviewed.
• The company’s assets, valued fairly, are equal to or greater than its liabilities.

The same solvency test applies to close corporations, ensuring consistency in determining financial health across different entity types.

Once a company or close corporation begins the liquidation procedure, the powers of its directors or members are suspended.

These powers may only continue with approval from the liquidator or the creditors (in a creditors’ voluntary winding-up) or from the liquidator or shareholders (in a members’ voluntary winding-up).

This ensures that the liquidation process is carried out effectively and without interference, prioritising creditors and legal compliance.

No, the liquidation procedure for companies and close corporations is fundamentally the same. Both follow the guidelines set out by the Companies Act, 2008, and, where applicable, the Companies Act, 1973.

This alignment ensures a standardised approach to company liquidation South Africa, regardless of the entity type.