Voluntary Liquidation

Liquidation

With Voluntary liquidation of a Company the business doesn’t need assets.

In addition once the business liabilities exceed its assets, by law the business must cease trading and apply for business rescue or voluntarily liquidate.

When the business is hopelessly insolvent, and factually and commercially insolvent, as provided for and envisage in Sections 344(f) and 345(1)(c) of the the old Companies Act, No 61 of 1973, read together with the provisions of Schedule 5 of the Act the business can apply for liquidation.

Employees

However, to ensure that employees are not negatively affected by the sequestration – or at least affected as little as possible – the business owners can register another business entity before the date on which the business stops trading. They can transfer the basic assets to the other entity (not encumbered by debt) for the purpose of trading, and transfer all the employees – or at least some of them – to the new business entity. This will ensure that the business can trade as usual while the old entity is liquidated. Keeping within the boundaries of the law is essential during this process and we recommend consulting with attorneys working with voluntary liquidations to ensure that you do everything by the book. – or at least affected as little as possible – the business owners can register another business entity before the date on which the business stops trading. They can transfer the basic assets to the other entity (not encumbered by debt) for the purpose of trading, and transfer all the employees – or at least some of them – to the new business entity. This will ensure that the business can trade as usual while the old entity is liquidated. Keeping within the boundaries of the law is essential during this process and we recommend consulting with us with voluntary liquidations to ensure that you do everything by the book.

Immediate Relief – Liquidation

The liquidation application is made ex parte by you as the applicant, for immediate relief. The court grants the provisional order and then the creditors are notified of the court date and liquidation application. Only SARS receives notification before the court date. The creditors get an opportunity to object and if no objections are received, the final voluntary liquidation order is set at the next court date. If there are objections, these must first be dealt with before the order can be granted.

In some instances depending on the creditors the order can be made final with immediate effect, note that once the provisional order is given, your creditors cannot take any further action.