HOW TO LIQUIDATE A COMPANY
THERE ARE TWO PLACES TO LIQUIDATE A COMPANY:
HIGH COURT LIQUIDATION OR LIQUIDATION AT CIPRO
The result of both methods are the same: the Company is liquidiated and the Master appoints a liquidator who will wind up the insolvent estate Liquidation in the High Court is more expensive and takes approximately two months.
Liquidation at Cipro is less expensive and takes approximately three weeks or less.
It depends on the situation of the Company as to where to liquidate it.
THERE ARE TWO METHODS TO LIQUIDATE A COMPANY:
1. VOLUNTARY LIQUIDATION:
When the directors of a Company unanimously decide to liquidate the Company when it cannot pay its debt.
It is better to liquidate your own Company, because then you decide when you will do it and it gives you the choice to nominate a liquidator who is friendly.
When a creditor brings a liquidation application against the Company.
If a creditor liquidates the Company, the creditor decides when and the creditor will most probably be successful in getting its liquidator appointed which can make it an unpleasant experience for the directors of the liquidated Company.
NO PERSONAL LIABILITY FOR DIRECTORS AFTER LIQUIDATION OF A COMPANY
Clause 129(7) of the new Companies Act (Act 71 of 2008)(as amended by the Companies Amendment Act 3 of 2011) says that you must either liquidate the Company as soon as possible, or put it under business rescue or send a notice to the business’ creditors, the staff and trade unions as to why the Company is not being liquidated.
This means that you must liquidate the business because if you don’t, the director/member can be held personally liable for the debt of the Company or Close Corporation even if you did not sign surety for the Company’s debt.
Therefore, there is an obligation on the directors/members to liquidate the business sooner rather than later.
SARS AND LIQUIDATION
Yes, SARS can hold you personally liable for certain taxes under the Tax Administration Act, but they don’t!
For the last 15 years and after hundreds and hundreds of liquidations, SARS has not taken legal action against any of our clients in their personal capacities. We don’t know why, but we guess the reason is that they usually write off the debt as soon as there is a liquidation.
A liquidation dissolves the business so no debt remains to be collected. SARS closes their file as soon as there is a liquidation.
The only SARS debt that a liquidation does not write off, is taxes due in terms of the Customs and Excise Act as those taxes cling to the manager of the business and not to the business.
The Tax Administration Act (Act 28 of 2011) (“the TAA”) states that the directors/members as well as their internal bookkeepers and external auditors CAN personally be held liable for the taxes of the business. But as we say, they don’t. Well to date they haven’t and we don’t foresee that it will change.
It is therefore so important that you take action to liquidate the entity if your taxes are in arrears and you can’t catch up, to avoid personal liability.
LIQUIDATION WRITES DEBT OFF
The only debt that you remain liable for personally is any debt that you signed surety for in your personal capacity.
You need to deal with this debt. We will explain to you how when you consult with us.
TAKE THE RIGHT ACTION NOW!
HERE ARE YOUR OPTIONS
- You can go under business rescue. This means that payment of debt is put on hold, but a very expensive stranger takes over your business to try and deal with creditors, plus you still have to pay the debt with money you don’t have. This doesn’t work 9 times out of 10.
- You can try a tax compromise with SARS where you try to make arrangements with SARS to pay the debt off. Usually it involves paying a lot of money to a person to negotiate on your behalf. Even if you get the compromise, you still have to pay the debt. This doesn’t work 9 times of out 10, because SARS is either unrealistic in their demands or the business simply does not have the money to pay the debt. (that is why they try to compromise in the first place). It doesn’t make sense to pay the debt if you can get rid of it.
- You can enter into a scheme of compromise in term of Section 311 of the Companies Act with your creditors. This means that you can make an arrangement to compromise with your creditors, but because you still have to pay the debt plus your creditors have to agree to your scheme. This doesn’t work 9 times out of 10.
- You can liquidate the business, and liquidation gets rid of all debt. Thereafter you can continue with your business without the problems of the old entity. Liquidation immediately arrests the situation, gets rid of any debt that you did not sign surety for, gives you the opportunity to restructure and you can do better business with better cash flow almost immediately.
- Liquidation solves your problem 10 times out of 10.
How to apply for liquidation
Other means can bring your business to a standstill.
Depending on your particular circumstances, we will guide you through the process.
We prepare and lodge the application and we also assist you with staying on your feet and continuing with business if you wish to do so.
It is possible to buy assets back and it is possible to finish jobs where you have already received deposits.
HOW DO YOU KNOW YOUR APPLICATION WILL BE SUCCESSFUL?
with all the liquidation applications that we have handled.
You don’t have to go to court.
The Companies Act puts the burden on you to liquidate an entity if it cannot pay its debt.
Let Us Work Together
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