Liquidating a Business in South Africa
Company Liquidation Process in South Africa
However, if you own a business, you can apply for liquidation of the business, regardless of whether the business has any assets, and even if there is no benefit to the creditors. If the Application is opposed, destiny nightfall the party who opposes must file an affidavit which sets our reasons why the application is opposed. The first court date is for a provisional application. It is the only debt that goes over to the person of the director s or the member s or the trustee s without the necessity of surety.
This is so because the law stipulates that the moment the liabilities of the business exceed its assets, the business is insolvent and must stop trading. One never wants to give control to a creditor, because if a creditor brings the liquidation application, it is usually aggressive because they are upset with the entity. One can only sequestrate, in terms of the Insolvency Act, if one owns a property or other big, pick up fully paid assets or if one has cash.
Many threats are issued to liquidate, but creditors do not necessarily proceed. The affidavit details the debt of the business and gives a summary of the circumstances that led to the liquidation. This affidavit will set out the debt of entity and a short bit of history as to why the entity needs to liquidate. In other applications one must give notice to the other affected party ies first with a number of days of notice, before you can place the matter on the court roll. Businesses are different and do not need to own assets or cash.
Companies and Intellectual Property Commission
The benefit will be that the creditors can share in the proceeds of a property sale or that they can share in the cash that the individual pays in. You may have to restructure, so some retrenchments may follow. If it is hopefully your nominated liquidator, you have a better chance of smooth sailing. As soon as the basic decision was made to close the entity down this is basically the most difficult decision! As soon as the provisional liquidation order is granted, no creditor may take any legal action against the entity and any legal action taken is suspended.
- You are welcome to contact us to discuss for more information.
- Creditors often threaten entities that they are going to liquidate them, without proceeding.
- How would you like to be contacted?
What is Liquidation of a Company? It is better to initiate the company liquidation process in South Africa voluntarily, as opposed to being forced by court order on demand of a creditor. Our attorneys will explain in detail the entire liquidation process in South Africa and handle it on your behalf. Insolvency is the umbrella term for liquidation and sequestration. The reason for this is because in terms of the Insolvency Act, when one sequestrates there must be a benefit to creditors.
The first important item is that no further debt must be paid once the decision has been made. If no opposition is lodged during this period, the Court grants the final liquidation order and the business entity is liquidated. The first step in the process is to decide on a date for the last day of trading. If you do your homework right and if the timing is right, you can carry on with business almost as usual, whilst the other entity is being liquidated. If an entity has no assets, it will not be really worth the while of any creditor to liquidate the entity, because liquidation is one of the more expensive application procedures in the law.
Sometimes entities are on the edge of solvency and insolvency. The longer the business struggles, the more debt will pile up and the higher the risk of a creditor taking legal steps to recover debt owed. Any creditor or other interested party who wants to oppose the application, must then do so before the return date. Company Liquidation Process in South Africa.
Featured Reasons for Liquidation
The provisional application court date is set and the application is brought by the applicant on a semi-urgent basis. If the entity or the party who lodged the application believes that the entity must be liquidated, we got married dating the matter will have to go to trial and the judge will have to make the decision. The affidavit is drafted by our attorneys. It is just a calmer and more controlled process.
No use liquidating the entity but you end up paying the debt in your personal capacity in any case! One must still earn an income and liquidating an entity will mean to a lot of people that their livelihood falls away. As such, the company liquidation process in South Africa differs from the sequestration process for individuals or natural persons.
If there is opposition, the relevant party must submit an affidavit detailing the reasons for opposing the application and a trial may follow. Once the provisional liquidation order is granted, the matter is postponed for about one month to a return date. Sometimes it is a difficult decision to make whether to liquidate an entity or not.
They also nominate the liquidator. On the return date, if nobody opposed the application, dating browse the order is made final and the entity is liquidated. The entity must then cease trading.
- For this reason the entity does not have to own assets to be liquidated.
- An affidavit is drafted on your behalf and an authorised person makes the application for voluntary liquidation of the business entity.
- There is nothing in our law that prohibits anybody from trading in another entity, so one can proceed with business as usual in a new entity.
- This is one of the reasons why people trade too long in entities when it should have been closed down or liquidated a long time ago.
- During this month, the applicant the entity must give notice to all creditors of the provisional liquidation order by sending them a copy of the court order.
- It is always better for the entity to bring a voluntary liquidation application first, as opposed to being liquidated by a creditor.
Find the right local SA attorney now
The provisional order is important, as once it has been granted, no creditor can take any steps to recover debt from the business. Businesses except for a sole proprietor liquidates and individuals sequestrate. They scratch harder and can make life difficult for you unnecessarily. The purpose for a creditor to liquidate an entity would be to have the assets of the entity sold so that the creditor can rather get something than nothing.