What is liquidation?
Liquidation occurs when a company is insolvent or unable to pay its obligations. This can happen as a result of legal court processes, at the request of creditors, alternatively the company may voluntarily decide to be liquidated. The company will then ‘close’, and its property will be reallocated to pay creditors and shareholders. By the end of the liquidation process, the bankrupt company will no longer be in existence.
How do you liquidate?
The liquidation process can be conducted in two ways; an application can be issued through the High Court, or by way of a director resolution. This will vary based on the type of business. Additionally, the steps to follow will be determined by the Risk Profile that is associated with that business.
The documents required include:
- Registration documents of the business
- The Directors’ or Members’ identification documents
- A list of assets and liabilities
- A SARS registration document
How long does it take to liquidate a company in South Africa?
The process of liquidating a company in South Africa usually takes between six months and two years. The variation in this timeframe may change depending on the complexity of the company as well as the number of and nature of assets to be realised.
What happens to a director of a company in liquidation in South Africa?
Once the company goes into liquidation, the powers of directors cease. The liquidator will then take on the role of the director, and the directors will have no legal power to represent the company. Therefore, the company’s service providers and liquidators must then deal with the liquidator and not the directors.
