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Company Liquidation in South Africa

Company Liquidation in South Africa

Company liquidation in South Africa may be the only remaining option for struggling businesses. While this can be a difficult decision for the company owner, it is required by law in certain circumstances.

Our lawyers in South Africa assist business owners in a wide range of situations, including those that have to do with winding up a company in South Africa.

When is company liquidation in South Africa required?

Liquidation becomes necessary when the company can no longer pay its debts to creditors. A common practice is to attempt to save the business before winding it up and business restructuring can be used.

When no other action is possible, and the company’s debts have become severe, it is time to end the business – usually through a voluntary application made by the company’s shareholders. Alternatively, liquidation can also be compulsory.

The liquidation process involves selling the remaining assets to pay the creditors and then distributing any remaining assets to the company shareholders.

For the purposes of ending the activity of a company, liquidating the business, and winding up a company in South Africa are terms that can be used interchangeably.

Who handles the liquidation process?

The liquidator is the person appointed to oversee the processes related to company liquidation in South Africa. This appointed individual has an important role during the liquidation process. Some of the important duties include the following:

  • notify the South African Revenue Service of the liquidation;
  • communicate, as needed, with the Revenue Service about the processes;
  • submit any outstanding tax returns to the authorities;
  • pay the outstanding tax liabilities for the company that will cease its activities in South Africa.

A liquidator who fails to meet the mandatory requirements can be held liable. Our South African lawyers can give you more details about this liability, as well as the liquidator’s capacities.

What are the general steps needed to close a company in South Africa?

Winding up a company involves several mandatory actions. The list below briefly outlines the main steps followed by those who will cease the activities of a South African company:

  • call a board meeting to decide the liquidation of the company and determine the last day of trading;
  • appoint a liquidator who will handle the important submissions to the tax authorities and will oversee the process;
  • the liquidator makes a detailed assessment of the company’s assets and debts and comes up with a plan to pay the creditors according to their status;
  • the liquidator makes sure that the company has no outstanding tax returns or outstanding tax liabilities to the authorities;
  • once the process is complete, the company will be struck off from the registrar.

Once the liquidation commences, the powers of the company’s directors cease, except for the situation in which the liquidator decides otherwise. Our attorney in South Africa can answer your questions concerning director liability in case of company liquidation.

According to available data, more than 900 companies have ceased their activities in 2023. Other statistics for the year indicate that:

  • 140 companies were liquidated in July;
  • 128 businesses were liquidated in June;
  • the total number of liquidations decreased by 14.2% during the first seven months of 2023, compared to the same period a year prior.

In addition to our solutions tailored to the needs of investors who wish to open or close a company, we can also answer important questions about immigration to South Africa.

Contact our law firm in South Africa for more information about company liquidation in South Africa, as well as for ongoing legal assistance throughout this process.