How Long Does Liquidation of a Company Take in South Africa?

If your business is failing, then you have a legal responsibility to take action in saving it or liquidating it. Indeed, unlike with an individual where the individual must have sufficient assets to ensure that sequestration can provide for enough benefits for the creditors and payment of the sequestration process, a company does not need any assets to apply for liquidation. Indeed, if the liabilities of the business far-exceed its assets and the business is unable to pay debts when such become due, then the owners must liquidate the company. You, however, may have questions, such as “how long does liquidation of a company take?

We understand how important it is to make an informed decision. To this end, let us answer the question of “how long does liquidation of a company take?”

 

How Long Does the Liquidation of a Solvent Company Take?

When a solvent firm seizes to trade and the directors want to close it, they apply for the de-registration of the business at CIPC. The business is removed from the CIPC register. Part of this process is the selling of assets before de-registration. The creditors are paid, and the solvent company can seize to exist. This is also a process of liquidation, and can take anywhere from a few weeks to several months before completed.

 

How Long Does the Liquidation of An Insolvent Company Take?

This process entails the winding up of the business. The application for liquidation of the company is made to court. The assets, if any, are sold and the creditors receive their benefits. Employees and SARS are also creditors. Once done, the liquidation account is finalised. The business is also removed from the register at CIPC. Note that this process can take several months and even years, depending on the complexity of the assets structure and the claims from creditors.

 

How Can One Continue to Trade?

The directors must decide on the last day of trading. From that day on, all the income from sales and services are to the benefit of creditors. The firm stops all payments to creditors to prevent benefit to one creditor above others. The directors cannot sell the assets during the time. Only the appointed liquidator can handle such. However, in many instances, directors register other business entities when they realise that their businesses are in trouble. They are then able to start trading in such entities to build up funds. Once the insolvent business is liquidated, the employees can be employed at the new entity. To this end, however, it is essential to speak to liquidation experts regarding legal aspects and to ensure compliance with all legislative requirements in South Africa.

It can take between four and six weeks from the moment the directors give instruction to the attorneys to have the firm liquidated to get the provisional order and thus protect against further legal action from creditors.

Give us a call if you need to liquidate your firm and want comprehensive answers and guidance on questions like “how long does liquidation of a company take”, steps to follow, and costs to expect.

 


Disclaimer: This article is for information purposes only and does not constitute legal advice. Call on our attorneys for legal advice, rather than relying on the information herein to make any decisions. The information is relevant as at the date of publishing.

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