Think of voluntary liquidation as a way for a business in South Africa that’s really struggling financially to get a break. Basically, if a company can’t pay its bills to the people it owes money to (its creditors), the owners and directors can decide to ask the High Court to officially shut the company down in an orderly way. This can happen for many reasons, but the rules for doing it voluntarily are always the same. This article will quickly explain what needs to happen for a company to successfully go through this voluntary shutdown.
South Africa’s insolvency law is regulated by the Insolvency Act No. 24 of 1936; the Constitution of South Africa Act No. 108 of 1996; the Companies Act No. 71 of 2008; and, where these pieces of legislation are silent, the common law. Section 80 of the Companies Act sets out the requirements for the voluntary winding up of a solvent company. The first requirement is that the company must adopt a special resolution that provides for the winding up by the company or its creditors. Secondly, the company would have to be compliant with CIPC (Companies and Intellectual Property Commission) by filing with it the resolution for winding up, as well as the prescribed notice thereof and the payment of the fee. Once these steps have been complied with, the Companies Act sees this as the beginning of the winding-up process of a company.
A resolution may provide for the winding up of a company; however, before filing the resolution and notice it is imperative for the company to ensure that it has arranged for security for the payment of the company’s debts to be satisfied within 12 months after the start of the winding-up of the company. However, should the company wish to dispense with the security, they must obtain the consent of the Master to dispense in addition to that. This may only be done if the company has submitted to the Master both a sworn statement by a director authorised by the board of directors stating that the company has no debts, as well as a certificate from the company’s auditors stating that, to the best of their knowledge, the company has no debts.
This is merely a brief overview of some of the requirements necessary for the voluntary liquidation of a company.
Contact Us for Expert Guidance on Voluntary Liquidation
Navigating the complexities of voluntary liquidation in South Africa requires a thorough understanding of the Insolvency Act, Companies Act, and common law. If your company is facing financial difficulties and considering voluntary liquidation, our team can provide the expert legal guidance you need.
Don’t face this intricate process alone. Contact us today to ensure your company complies with all requirements, from special resolutions and CIPC filings to securing creditor payments. We’re here to help you understand your options and guide you through every step of the voluntary liquidation process.
Saeedah Salie
saeedah@bbplaw.attorney
Associate
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