Business Liquidation Requirements
The following must be considered before Business Liquidation can occur successfully. Costs will vary based on these issues.
CIPC Annual Returns and Fees must be up to date
All businesses (including external companies) and close corporations are required by law to file their annual returns with the Companies and Intellectual Property Commission (CIPC) on an annual basis, within a prescribed time period. The purpose for the lodging of such annual returns is to confirm whether a registered business is still trading, or if it will be in business in the near future. Therefore, if annual returns are not filed within the prescribed time period, the assumption is that the business is inactive, and as such CIPC will start the de-registration process to remove the business from its active records. The legal effect of the de-registration process is that the juristic personality is withdrawn and the company or close corporation ceases to exist.
Beneficial Ownership Certificate (Not a requirement of the Liquidation process at present, but will in the future)
An important change to the Companies Act was the addition of the definition for “beneficial owner”. According to the amendment, which came into effect on 1 April 2023, a beneficial owner in terms of a company is an individual who directly or indirectly owns the company or exerts effective control over it. This control can manifest through various means, for instance holding interests in company securities, exercising voting rights or influencing management decisions.
The CIPC is responsible for maintaining a register of beneficial ownership for companies and close corporations, and any individual with more than a 5% beneficial ownership stake in one of these entities must register with the CIPC. The register contains personal information about beneficial owners, their level of ownership or control, and the dates they became or ceased to be beneficial owners.
In terms of the amended regulations, pre-existing entities (those who were incorporated before 24 May 2023) must file their beneficial ownership information in line with the annual return anniversary date. New entities must file beneficial ownership information within 10 business days after the date of incorporation. Whenever there are changes to beneficial ownership records, they must be updated within 10 days.
This amendment came into effect on 1 July 2024 and all annual returns filed after this date must also be accompanied by a Beneficial Ownership Certificate. Annual Returns will not be updated with this Certificate going forward.
De-Registration and Reinstatement of a Company
Failure to submit annual returns will result in the Commission assuming that the company and/or close corporation is not doing business or is not intending on doing business in the foreseeable future and will therefore result in the company/close corporation being de-registered.
Businesses and close corporations that are non-compliant with annual returns will experience a penalty fee to their standard filing fee, and if non-compliance continues, will be de-registered. Once de-registered, the company or close corporation ceases to exist and the directors or members may be held personally liable for the debt of the Business or close corporation.
A Business that is already de-registered must be reinstated before Liquidation can take place. Once CIPC has approved the re-instatement application, all outstanding Annual Returns must be filed in order to complete the re-instatement process. Re-instatement takes time and can delay the liquidation of the Business. If you are non-compliant and require Business Liquidation, it is advisible to start the process immediately. We have accounting services that can assist you with bringing your compliance up to date or with reinstating your company. You can also utilise your own accounting service to do this.
Other
The above examples are some of the issues that may delay Business Liquidation. There will also be additional costs involved if these services are to be rendered by our accountancy firm before Business Liquidation occurs. You are not obligated to use our accountancy firm. You can obtain your own or use your existing accountancy firm.
How long will it take to complete the process
If you do not have any of the above issues, then you will receive your Liquidation Certificate within 1-2 weeks.
STEP 1: Assessment - During this phase, our attorney will consult you on the next steps and provide a detailed explanation of the process in terms of your specific company requirements. You will receive an assessment within 48 hours. This service is free of charge.
STEP 2: Application & Legal Steps. We will prepare your Liquidation Application and draft the necessary legal documentation. This will be lodged with the Master of the Court within 1 week of the documentation being finalised. i.e. signed by the Directors of the Business and Certified by a Commissioner of Oaths.
STEP 3: Provisional Liquidation Certificate. Once lodged with the Master of the Court, your Provisional Liquidation Certificate will be issued within 1-2 weeks.
STEP 4: Appointment of the Liquidator. They will be responsible for meeting with creditors, selling assets, distributing funds, SARS and finalising the winding up of the company.
While your company is liquidated once the Provisional Certificate is obtained, the entire process to wind up a company can take up to 12 months i.e. Selling assets, distributing funds to creditors, contracts, employees, etc.
Basic Costs to Liquidate a Company
Please note that the fees below can be paid off over a negotiated term.
1. Assessment - R0.00.
We will discuss next steps and provide a detailed explanation of the process as well as the costs.
2. Business Liquidations from R15,000.00 but not more than R30,000.00. Based on various factors like Annual Turnover / Annual Return Filings / Outstanding Creditors/ Assets in the business/ Employee issues / SARS penalties.
3. For companies that are not currently compliant, we have add on services to restore compliancy. This must be attended to first before the Liquidation can proceed successfully.
4. When a Director signs personal surety for Business debt, the Director becomes personally responsible for that Business debt. We will discuss an additional solution that can write off 75% of that debt. You only pay back 25% of the debt owing. This is called Voluntary Surrender.
