If a company’s debts are running out of control, the Directors’ may be held liable in their personal capacity if that company continues to trade. It is therefore that many companies choose to formally liquidate their company and distance themselves from their debt.
A company can apply for liquidation of the business, regardless of whether the business has any assets. The company can do this even if there is little or no benefit to creditors. The reason is that that our law stipulates that the moment the liabilities of the business exceed its assets, the business is insolvent and must stop trading. 

South African law provides that a company can either voluntarily apply to the High Court to be liquidated or be forced into liquidation by its creditors or its shareholders.

Section 79 of the Companies Act No 71 of 2008 provides as follows:

“79. (1) A solvent company may be dissolved by—
(a) voluntary winding-up initiated by the company as contemplated in section     
80, and conducted either—
(i) by the company; or
(ii) by the company’s creditors, as determined by the resolution of the company; or

(b) winding-up and liquidation by court order, as contemplated in section 81.”

It is better to initiate the company liquidation process in South Africa voluntarily, as opposed to being forced by court order by its creditors.

The reason therefore is that in doing so, you have the opportunity to register another business before the process starts to ensure continuity of trade and thus employment for yourself and your workers. Employees will not be able to make a case against the employer at the CCMA and unless you have signed surety for the company’s debts, your personal credit rating will not be affected.

Contact us for to assist you with your company Liquidation

Voluntary Company Liquidations – Should you consider?