While no one starts a business envisioning that it might not succeed, liquidations in South Africa and further afield are unfortunately more commonplace than you might think. Liquidation is a financial process whereby a company’s lifespan is brought to an end. Companies can either undergo voluntary liquidation or compulsory liquidation. During the process, they will sell off their assets, pay creditors, issue any of the remaining assets to various shareholders, and eventually close the company. Understanding the legal and financial complexities is imperative when embarking on liquidations in South Africa and an experienced insolvency attorney can assist in expediting the process.
If you are facing insolvency and are unsure where to go, our qualified insolvency attorneys are here to guide you every step of the way. Read on to learn more about liquidations in South Africa and how we at Francois Uys Inc Attorneys can help.
Understanding Corporate Liquidations in South Africa
Liquidation occurs when a company becomes insolvent. This happens when an organisation’s assets can no longer cover its liabilities, or they have completely stopped trading. In such instances, there is generally no likelihood of the business being restructured or finding financial investment. Under the Companies Act of 1973, insolvent companies must ‘wind up’ and close operations. Liquidations can either be voluntary – when the board of directors of a company decide to liquidate – or compulsory when a director, shareholder, or creditor makes an application at the court.
During voluntary liquidation, the board of directors will generally appoint a liquidator to help wind things up, sell assets, and pay the necessary stakeholders. During compulsory liquidation, a liquidator will be appointed by the court.
Liquidation in South Africa FAQs
Facing the prospect of liquidation is undoubtedly daunting. When it comes to liquidations in South Africa, many queries arise. Let’s explore some common questions.
1. Who remains in charge when liquidation occurs?
The appointed liquidator will manage all operations relating to winding down the company. They have the legal ability and authority to act on behalf of the organisation.
2. What does liquidation entail?
Liquidation entails winding up a company’s affairs, selling assets, and dividing the revenue amongst creditors. The process has several components including ending contracts, selling all assets, settling any legal issues, ceasing business operations, collecting money that is still owed to the company, and distributing money back to creditors.
3. Who gets paid first during liquidation?
Secured creditors are paid first in the event of liquidation. Secured creditors are usually banks or other asset lenders. After they have been paid, unsecured creditors, including employees are paid. If there is any money left, shareholders will be paid last.
4. How long will it take to liquidate my company?
The duration of liquidation depends on the complexity of the situation. It can take anything from a few months up to two years. When you work with our qualified attorneys, we will discuss the situation thoroughly and give you insight into how long the process will take. We always strive to make the process as seamless as possible so that you can get back on your feet.
5. How do we discuss liquidation with creditors?
When you work with our seasoned attorneys, we will handle communication efforts on your behalf. This can significantly reduce stress and allow us to get the best possible outcome.
Access a Wealth of Experience When Working with Us
Francois Uys Incorporated Attorneys have over 30 years of experience in insolvency law and over 8000 successful cases to date. We are confident that we can use our expert knowledge and skillset to liquidate your company in the most seamless way possible. We understand how overwhelming financial distress can be and use our wealth of knowledge and experience to get you the best possible outcome.
Reach out to our friendly team and we will happily arrange a free call to discuss your situation in greater detail and advise on the steps ahead.
Disclaimer: This article is for information purposes only. It does not constitute legal advice and cannot be used to make any decisions. For advice on the topic of liquidation, contact Francois Uys Inc. The information is relevant as of the date of publishing.
Sources:
Liquidations in SA: https://www.sars.gov.za/businesses-and-employers/liquidations/#:~:text=When%20a%20company%2Fclose%20corporation,closing%20the%20company%2Fclose%20corporation.
