What is Liquidation
Liquidation is the formal process of winding up a company’s affairs, selling its assets, and distributing the proceeds to creditors. The duration of this process can depend on various factors, including the complexity of the company’s finances, the type of liquidation, and the responsiveness of creditors. A business can do a voluntary liquidation, or it can be compulsory liquidated by a creditor. This article is written by a liquidation lawyer that has specialised in liquidations for the past 17 years. We offer liquidation services to any size business.
What is a CIPC Liquidation
CIPC Liquidation: If a company opts for voluntary liquidation through the Companies and Intellectual Property Commission (CIPC), the process can typically be completed in about one week. The timeline begins when the directors and shareholders sign a special resolution to liquidate. Once the relevant signed documentation is lodged with the CIPC, it usually takes 5 days to register the resolution with the CIPC and the company is then liquidated.
What is a High Court Liquidation
High Court Liquidation: The timeline for compulsory liquidation starts when a winding-up application is filed in the High Court. No less than 10 days’ notice must be given. Once the matter appears before court, the court can grant a provisional liquidation order subject to a return date. The return date is usually no less and one month in advance, but the date can be later. If no one opposed the provisional order, the liquidation order will be made final and the company will be liquidated.
What is the Winding-Up Process After Liquidation
The winding up process has its own timelines as described next.
- Appointment of a Liquidator: After liquidation is confirmed, the Master of the High Court appoints a liquidator. Although this appointment should occur within one month of the liquidation date, it does not always happen. Sometimes we wait 4 or 5 months for the appointment of a liquidator due to some glitch, but in most provinces liquidators are appointed in about 30 days after liquidation in the majority of cases in our experience.
- First Meeting of Creditors: The liquidator must call the first meeting of creditors approximately 6 to 8 weeks after the liquidation begins. This meeting serves to allow creditors to prove their claims.
- Liquidator’s Responsibilities: The liquidator is tasked with selling the company’s assets (if any), paying creditors, and investigating the company’s affairs. This phase can take anywhere from 6 months to 2 years, depending on the complexity of the assets and any investigations required.
- Liquidation and Distribution Account: The liquidator must submit a liquidation and distribution account to the Master within six months of appointment but can only do so if they are able to do so. The liquidator can ask for an extension if the liquidation and distribution account cannot be submitted. The liquidation and distribution account details the assets sold (if any), costs incurred, and how the remaining funds will be distributed to creditors.
- Final Approval: The Master must approve the liquidation and distribution account. Once approved, the liquidation process is formally concluded, although the timeline can vary based on the efficiency of the Master’s office. Once the liquidation and distribution account is approved, the Master will deregister the company at the CIPC.
Creditors May Not Proceed to Collect Debt After Liquidation
It is important to note that once the company is liquidated, no creditor may take any legal action against the company, even if it takes a further month to appoint a liquidator. The important time in a liquidation is the liquidation date. It does not matter how long the winding up process of the liquidator takes, the company is still liquidated and that is what counts.
