What is Liquidation

Liquidation is a legal process that occurs when a company is brought to an end and a liquidator is appointed to oversee the sale of the company’s assets. This can happen for a variety of reasons, including insolvency, financial difficulties, or a decision by the company’s directors to wind up the business. During the liquidation process, the liquidator will take control of the company’s assets, including any property, equipment, or inventory. They will then sell these assets in order to pay off the company’s creditors. A company can be liquidated without owning any assets. 

What happens to creditors

Creditors will be paid in a specific order, which is determined by South African law. First, secured creditors will be paid, which include creditors who have a security interest in the company’s assets, such as a mortgage holder. Next, preferent creditors will be paid, which include employees who are owed salaries or wages, as well as certain taxes owed to the government. Finally, any remaining funds will be distributed to unsecured creditors, which include suppliers, contractors, and other parties owed money by the company.

Whatever a creditor does not get must be written off as the company does not exist any longer. If the director signed personal surety then the creditor can call up the surety and collect the monies from the director. If the director did not sign personal surety, the liquidation writes off the debt and the monies can not be claimed from the director. This includes SARS debt.

What happens after assets sold

Once all of the company’s assets have been sold and the proceeds distributed to creditors, the liquidator will file a report with the Companies and Intellectual Property Commission (CIPC) and apply to deregister the company. At this point, the company ceases to exist as a legal entity. It’s important to note that liquidation is a last resort, and there may be other options available to struggling companies, such as business rescue or debt restructuring.


In summary, liquidation is a legal process that involves winding up a company and selling its assets in order to pay off creditors. While it’s a difficult and often emotional process for everyone involved, it’s important to remember that it can also provide a fresh start for business owners who are struggling financially. If you’re considering liquidation for your company, it’s important to seek the advice of a qualified professional who can help you navigate the process and make the best decisions for your situation.