LIQUIDATION IN SOUTH AFRICA 

Many business owners want to know more about liquidation in South Africa. Many companies are having trouble making ends meet. 

This does not imply that online sources of information are reliable. Because of the aforementioned, we chose to provide consumers with an in-depth introduction to the business liquidation process in South Africa.

Different names but the same process
Some online sources may claim that there are three distinct methods for liquidating a business, but in reality, they are simply different names for the same process. Liquidation of a company is also known as insolvency, bankruptcy, and winding up of the business. 

Governing legislation
In South Africa, the liquidation process is regulated by two different laws. Namely the Companies Act 71 of 2008 in collaboration with the Insolvency Act.  

How to determine whether a company is a potential candidate for liquidation?
This is an excellent question with a straightforward answer. If the company is unable to pay its debts when they become due, or if it anticipates being unable to fulfil its financial obligations in the near future, the board of directors may adopt a resolution to that effect. The company will then submit a voluntary liquidation application to CIPC. Currently, this is the most cost-effective liquidation process. Alternatively, a creditor could file a liquidation application in court. This process is both costly and hostile.

What to Expect When a Business Is Liquidated in South Africa:
• The company ceases operations.
• The Company is deregistered, and the entity ceases to exist.
• Directors will no longer have any role in the company.
• Employees will be laid off.
• Company assets are sold to cover the costs of the winding-up process and to reimburse various creditors that claimed against the Liquidated Company.

Important factors to take into consideration with the Liquidation Process in South Africa.
Once a company is placed in liquidation, it must stop trading unless it is necessary to continue trading in the best interests of all creditors. Trading may only resume if authorised by the court or the creditors and shareholders. The entity's last day of trading is determined, after which the entity ceases trading.

What happens to the Company Assets?
All assets will be frozen, and no disposal of assets is permitted. Bear in mind that hiding assets is a criminal offense, and anyone who assists in hiding assets from the liquidator can face criminal charges and even prison time. 

Creditors lose the right to pursue legal action against the company.  Therefore, any pending civil proceedings against the company are stayed, and any judgment execution orders issued after the commencement of the liquidation proceedings are null and void. 

Creditors are notified, and the process of winding up of the bankrupt business begins.

Once the Master of the High Court confirms the final liquidation and distribution account and the winding-up process is finalised, the liquidator will continue to pay any money available for distribution to the creditors if they've proven their claims against the liquidated company.

The creditors who submitted claims against the liquidated company will be responsible for the contribution due if the assets are insufficient to cover the cost of the liquidation.

In which order will creditors be paid when a business is liquidated in South Africa?
Secured Creditors, Example: South African Revenue Service (SARS)
Preferent Creditors, Example: Employee Remuneration
Concurrent Creditors: Shareholders of the Company

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