What is Company Liquidation?

Company liquidation in South Africa means that the company is being wound up and its assets are being sold off to repay the debts owed to its creditors.

It is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations when and as they fall due. As the company operations end, remaining company assets are sold off to pay creditors and shareholders, based on the priority of their claims. The process of liquidation is governed by the Companies Act 71 of 2008. The Companies and Intellectual Property Commission (the CIPC) has a minor role in company and close corporation liquidations which is limited to noting and effecting the deregistration of the entity once the legal process is complete.


What Happens with Company Liquidations?

The liquidation process is typically initiated when a company is financially distressed to the point where it cannot meet its debt obligations. This may be done voluntarily by the shareholders or directors of the company. Or it can be initiated by the court in response to an application by one or more of the company’s creditors.

Once the application for liquidation is made, a liquidator is appointed. The liquidator is typically a qualified individual, such as an attorney or an accountant, who is responsible for managing the liquidation process.

The company ceases its business operations, and the employees are generally terminated.

The liquidator notifies all the known creditors of the company and interested parties such as shareholders and employees of the liquidation. Creditors and interested parties are given a specific period to submit their claims against the company. The liquidator reviews and verifies the claims submitted and assesses the validity and priority of each claim.

The liquidator then proceeds to sell off the company’s assets, including property, inventory, and equipment, to generate funds for repaying claimants. Assets are typically sold through public auctions or private sales.

Funds generated from the asset sales are distributed to creditors based on the priority of their claims. There is a formal priority in terms of which claimants are paid. For instance, secured creditors, such as banks with collateral, are usually given priority, followed by preferential creditors such as employees, followed by unsecured creditors.

Once all the assets are sold, and the funds are distributed, the liquidator finalises the company’s financial affairs. The CIPC is notified, and the company is formally dissolved and deregistered.

It is important to note that the company liquidation process may be complex, time-consuming and have significant financial consequences for all the interested parties. It is advisable for companies considering liquidation to seek professional advice from attorneys who specialise in insolvency and liquidations proceedings in South Africa.

Select Attorneys that Specialise in Insolvency Law

Many processes in company liquidation involve strict formal requirements and defined time constraints. Following the correct processes and procedures and making the correct legal decisions during the proceedings may significantly impact the outcome for the insolvent company. In cases involving the liquidation of large companies, it is not only the creditors but also the shareholders and employees who may be negatively affected. Having attorneys, recognised as specialist insolvency and liquidation lawyers guiding you will help you avoid any potential pitfalls, and prevent you from missing any important procedural steps.

Has your company’s debt become totally unmanageable? Is company liquidation among the options you are considering? There is no such thing as a simple company liquidation! Choose attorneys with a long track record of resolving problems with debt and pursuing successful company liquidations. Francois Uys Incorporated Attorneys are specialist insolvency lawyers in South Africa with a proven history of success. We have been helping indebted companies for decades. with insolvency, liquidation, sequestration, business rescue, and debt restructuring.

We are totally committed to guiding you to the best possible outcome from the liquidation of your company while protecting your interests all the way. Before making any decisions, that you may regret, contact Francois Uys Inc Attorneys for professional advice.


Disclaimer: This article is for information purposes only. It does not constitute legal advice and cannot be used to make any legal or business decisions. For advice on the topics of insolvency, company liquidation, business rescue, sequestration, and debt restructuring contact Francois Uys Inc Attorneys. The information is relevant as of the date of publishing.