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072 855 8106 nanika@nanikalaw.co.za

LIQUIDATIONs

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Liquidation South Africa: How to liquidate a company

Liquidate a company in South Africa, there are 2 ways, both methods are the same.

CICP LIQUIDATION IN SOUTH AFRICA

In South Africa, a business can be liquidated at the Companies Offices (CIPC). We draft the necessary documentation and after signature lodge it at CIPC. It takes about 3 weeks to get a liquidation letter. Note that we can liquidate a company for you whether your business is in Cape, Town, Johannesburg, Durban, Bloemfontein, Pretoria (Tshwane), Port Elizabeth, Pofadder or anywhere in South Africa. We also handle liquidations for expatriates who need to wind up business in South Africa.

HIGH COURT LIQUIDATION IN SOUTH AFRICA

A South African business can be liquidated in the High Court. An application for the liquidation will be placed on the Court roll and a provisional liquidation order granted on that day. The matter will be postponed to a return date in a minimum of one month. On the return date, if nobody opposed the provisional liquidation order, the court will make the order final on the return date. We are liquidation attorneys working in Cape Town, Johannesburg, Pretoria/Tshwane, Durban, Port Elizabeth, Bloemfontein, Kimberley as well as all other areas of the country.

There are two methods to wind up a Company or a Close Corporation in South Africa:

VOLUNTARY LIQUIDATION IN SOUTH AFRICA

The directors sign a resolution to liquidate the business voluntarily.
It is better to liquidate voluntarily as it gives you the time to manage your affairs and we can assist you with carrying on with business so that you can stay on your feet during this process.

COMPULSORY LIQUIDATION IN SOUTH AFRICA

A creditor or an aggrieved director can bring a forced liquidation against the business. It is a good method to collect an outstanding debt or to place assets under the control of a liquidator. To ensure that they are not lost.

LIQUIDATION WRITES DEBT OFF

All the debt of the company or close corporation is written off in a liquidation, even SARS debt.

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 place the business 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.

SARS AND LIQUIDATION

Does your business owe SARS monies and you fear that SARS will persecute you?

A business can still be liquidated even if it owes SARS money.

Tax Administration Act (Act 28 of 2011) (the TAA)

The TAA makes provision that the directors/members, as well as their internal bookkeepers and external auditors, can personally be held liable for the taxes of the business by SARS.

For the last 15 years and after hundreds of liquidations, SARS has not taken legal action against any of our clients in their personal capacities after liquidation. When there is a liquidation, SARS nearly always writes the monies off.

In any case, the directors can also personally sequestrate to get rid of any SARS business debt that SARS may want to claim from the directors.

The only time that SARS definitely does not write the debt of after a liquidation, is if there are taxes due in terms of the Customs and Excise Act, or if they are in the process of a fraud case against the company or the director. The reason for this is that in terms of the Customs and Excise Act, the manager of the premises and not the business, is liable for any customs and excise duties. With regards to a fraud case – fraud is fraud and if a director committed fraud, a liquidation will not make the criminal case go away. Directors must first commit fraud to be charged with fraud. The average business owner does not commit fraud.

Other than that, SARS has never held any of our directors (or members of Close Corporations) personally liable for the taxes of the business.

In any case, as far as VAT is concerned, SARS cannot hold the directors personally liable for the non-payment of VAT. Read our articles here on the Court’s confirmation that directors are not personally liable for VAT. (lyn the articles I am referring to are: Owing VAT to SARS is not a crime and Owing VAT is not theft.

If you don’t liquidate the entity, SARS has ample opportunity to take legal action against directors if they decide to do so

Before liquidation SARS might just decide to take legal action against the directors in their personal capacity in terms of the Tax Administration Act. Leaving that particular door open is not an advisable option. It is therefore so important that you take action to liquidate the entity sooner rather than later if your taxes are in arrears and you can’t catch up.

The sooner you liquidate, the sooner the problem goes away.

Directors and liability after liquidation

NO PERSONAL LIABILITY FOR DIRECTORS AFTER LIQUIDATION OF A COMPANY
*Providing no surety has been signed

Unless a director/member signed surety for the debt of the Close Corporation or the Company, they will not be liable for the debt of the business after liquidation.

Clause 129(7) of the Companies Act (Act 71 of 2008) as amended by the Companies Amendment Act 3 of 2011), states that you have three choices with a Company that is in financial trouble, namely:

Liquidate the insolvent Company (or Close Corporation); or
Place the insolvent Company under business rescue; or
Send a notice to the creditors, staff and trade unions of the business as to why the business is not being liquidated.
If you as the director or member do not do one of the three above when the business experiences financial problems, you as the director or member can be held personally liable for the debt of the business, even if you did not sign surety for the debt of the business.

THEREFORE THERE IS AN OBLIGATION ON MEMBERS/DIRECTORS TO LIQUIDATE THE BUSINESS SOONER RATHER THAN LATER

HOW DO YOU KNOW YOUR LIQUIDATION APPLICATION WILL BE SUCCESSFUL? 

WE HAVE HAD 100% SUCCESS WITH ALL THE SOUTH AFRICAN 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.

HOW TO APPLY FOR LIQUIDATION 

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.

We are liquidation lawyers and manage liquidations all over South Africa. We have clients in Johannesburg, Cape Town, Pretoria/Tshwane, Durban, Port Elizabeth, Somerset West, East London, Kimberley, Bloemfontein and many other cities and villages in the country. We also have clients abroad who are expats and need our help with liquidating companies they have left behind. We can help you too.

Tel- 010 286 1966
Fax- 012 663 5627
Cell- 072 855 8106
nanika@nanikalaw.co.za

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