COMPANY LIQUIDATION 

Company Liquidation FAQs:  In this article, we will discuss the frequently asked questions (FAQ's) about company liquidation and what it entails. If you want to know what all the fuss is about and how you, as a business owner, can benefit from this process, don't stop reading now. 

What can I learn by going through Company Liquidation FAQs? 
We will endeavour to explain the process of company liquidation and what to expect when considering liquidation as a debt relief remedy for over-indebted businesses in South Africa.  Therefore, the company liquidation FAQs.

WHAT IS COMPANY LIQUIDATION AND WHAT DOES IT ALL ENTAIL?
Company Liquidation is specifically designed to assist companies in Financial Distress to rid themselves from Business Debt, and to Declare the Company Bankrupt.  

1. Is there a quick and easy process to Liquidate a Company?
Yes, a director/s of companies can utilise the Companies Intellectual Property Commision, also abbreviated as CIPC to declare a business insolvent or bankrupt.  However, there is a specific criterion that need to be followed to continue with the liquidation of a company on CIPC's platform, if these specific criteria are not met the liquidation process will not be successful. 

2. How will liquidating a company affect director's personal credit profiles?
The CIPC registered company is a separate legal entity and therefore do not form part of the director's personal credit profile.  Company debt therefore does not form part of the personal credit profile of the director unless the director's signed surety in their personal capacity for company debts. 

3. How long does it take to Liquidate a Company via the CIPC portal?
It is fairly quick when you utilise the CIPC portal.  The liquidation order for the company can be done as soon as 10 workdays.  But bear in mind that there is quite a substantial amount of documentation that must be drafted and signed before it can be submitted for liquidation of the company on CIPC.  It is advisable that an expert specialising in company liquidation assist you in this endeavor to ensure the success of the application. 
  
4. What happens to the Company Debt after Liquidation?
Creditors will need to wait for a liquidator to be appointed before submitting their claims against the liquidated company, alternatively called the insolvent company. 

5. Can a company be liquidated only by way of the CIPC portal, or can it be done via a court application as well?
A liquidation application can also be brought via a high court application as well.  But it is costly, because you will need an attorney and an advocate to assist you in this application. Therefore, business liquidation via CIPC's portal is much more cost effective.  

6. What is Compulsory Liquidation of a Company?
Compulsory liquidation occurs when a creditor approaches the court with an application to liquidate the company. This application will be based on an unpaid debt, such as goods purchased and delivered, loans, services provided but not paid for, and so on. This process can only be performed in the High Court of South Africa, not on the CIPC platform. This is an expensive process, and while it is highly effective in ensuring that a business does not continue to trade while bankrupt, it does not guarantee that the creditor who filed the application receives its money due. Creditors cover the cost of the lawsuit.

7.  Why Directors have the opportunity to Liquidate the Company via Director's Resolution?
In terms of the Companies Act of South Africa it is a criminal offence if a business keeps trading if the directors and / or owners are aware that they are no longer in a position to service their financial responsibilities. Therefore, to avoid Reckless Trading which is a Criminal Offence in terms of Section 214 of the New Companies Act, directors have the right to voluntary liquidate the company by way of director's resolution to avoid being criminally charged for reckless trading. 

8.  Can a business still be declared insolvent if there's no assets?
Yes, it is not necessary for a company to have assets, movable or immovable to apply for liquidation.  If a company is over-indebted and don't have any assets it can still be liquidated.  

9.  Company liquidation and employees?
Once the directors of the company make the decision to liquidate the company, the company must stop trading.  The personnel must be informed that the company is going to liquidate, and they will have the opportunity to claim their salaries from the liquidated company.  

10.  What will happen to labour disputes and matters that's been reported at the CCMA due to unpaid salaries or any other matters?
Once the liquidator is appointed, he/she together with the master of the high court will deal with the claims and the liquidator will make the decision in terms of payment if there's assets in the company.  If there's no assets, the debts will be written off.   

Please don’t hesitate to CONTACT CURE DEBT, your BUSINESS DEBT SPECIALIST, they will be able to answer all your questions herein.


Contact Cure Debt today to assist you with all your Financial Difficulties and start living again.

Disclaimer: This article is intended to provide general information only and does not constitute legal advice. Call Cure Debt before making any decisions based on the information provided here. The information is current as of the date of publication.