What is Liquidation?

When a business is unable to pay it’s debts, the owner of the company can apply to liquidate the business. Liquidation encompasses the process of a Liquidator taking charge of the estate and selling the assets by way of public auction.

If auctioning off the client’s assets does not generate enough revenue to pay off debt, Credit Providers will turn to personal sureties to pay the difference. If the directors or members cannot settle the outstanding debts, then they have the option to include these debts under debt review, or apply for Sequestration in their personal capacity.

Liquidation documents are lodged

Liquidations Documents & Requisitions from Credit Providers are lodged at the Master of the High Court.

First Meeting with Credit Providers

A meeting is arranged with all the Credit Providers to determine the outstanding debt owing

A Liquidator is Appointed

A Liquidator is appointed to manage the claims and all the Credit Providers are required to submit claims if they want to participate in the Liqudation.

Second meeting with Credit Providers

The Liquidator must convene a Second Meeting of the Credit Providers. At this meeting the Liquidator must Lodge a Report in Terms of Sec 81 of the Insolvency Act 24 of 1936. This report is a detailed report of the Current Affairs (Assets & Liabilities) of the Liquidated Company or Closed Corporation.

The Master of the High Court

The Master of the High Court and the Credit Providers will Accept and Adopt the Resolutions of the Report. Credit Providers can also lodge and prove Claims against the Insolvent Company or Closed Corporation.

Lodge Liquidation and Distribution Account

Once all the Assets of the Company or Close Corporation have been sold by way of Private or Public Auction, the Liquidator must draft and Lodge a Liquidation and Distribution Account at the Master of the High Court.

Lodge Liquidation and Distribution Account

The Master of the High Court will examine the Liquidation & Distribution Account, the Master of the High Court will approve the account in concept and if satisfied give permission to the Liquidator to advertise the Account.

Lodge Liquidation and Distribution Account

This process can take anything from one month to six months and if satisfied, gives consent to the Liquidators to advertise the Account to lie for inspection for a period of 14 days.

Confirmation of the Liquidation

If no objections are lodged, the Master of the High Court will confirm the Liquidation and Distribution Account in terms of which the Liquidator is entitled to pay dividends to Credit Providers

Liquidation Process

Please contact our offices on the numbers provided on our website to discuss your specific needs.

Each case is different and unique.

Benefits of Liquidation:

Relatively low costs involved

The legal costs involed in liquidating a Company are significantly lower than the oustanding debt owed to the Credit Providers.

Leases can be cancelled

Terms on lease and hire purchase agreements are generally terminated at the date of Liquidation, meaning that no further payments need to be made. If any arrears exist the leasing agency can put in a claim along with the other credit providers.

Legal action is halted

ny legal action against the Company is stopped on Liquidation. As long as you have not signed personal surety for a company debt, creditors will be unable to take action against you

Outstanding debts are written off

As a director you have no legal liability to repay monies owed by the business, unless personal surety was given for company debts. This opportunity exists to avoid any investments from being swallowed up by existing debts.

Avoid court processes

By voluntarily choosing to Liquidate the Company you demonstrate to the public that Liquidation was a company choice rather than a Credit Provider forcing legal action against you

Disadvantages of Liquidation

All staff will be made redundant

When staff notice the events unfolding they look for new employment, abandoning their jobs and making it difficult for the Company to continue the business under a new company name. Intellectual capital is lost and new staff will have to be employed and trained.

Personal liability for company debts

Becoming personally liable for company debts can happen if a Director signed personal surety against the debts of the business. A Credit Provider can enforce the debt if they are unable to reach an agreement for repayment. In this event it may also become necessary to Sequestrate the Director that signed personal surety for the debt.

All business assets will be sold

There will be no remaining assets with which to start a new business. All existing assets will be sold off in order to provide a dividend to Credit Providers where possible, and for the insolvency practitioner to collect their fee.

Cost of Liquidation

It will cost : R30,000.00 when applying

to liquidate your Company. Where a Director has signed personal surety for debt an additional R8,000.00 must be paid to Sequestrate the Director of the Company.