Exclusively for Business Owners in Distress

Liquidation (In a nutshell)

When a business dream turns into a nightmare:

To own your own business (CC or Company), and to manage the profitability of it, may at times be very stressful and most entrepreneurs that dream of having their own business don’t realise this. You often hear employees saying, “ I am making the boss rich”, but what most employees don’t realise is all the financial stress that comes with running a business. There are salaries that must be paid, rent, telephone, interest paid on the bank overdraft, etc. – not even to mention SARS.

Unfortunately most ventures reach a point of no return – the debt overshadows the income – when this situation arises, the stress levels of the owner, his or hers direct family and stakeholders in a company reach breaking point. This is when sub-standard business deals are formed with negative long-effects. It merely provides for an immediate relief, with no long-term solutions. It is always the best practice to discuss the situation with your financial advisor, and to follow the guidance provided by the professional. When the decision is
reached to liquidate the business it is important to act fast with the help of professionals.


If you are a member of a CC or a director of a Company, that is unable to keep the business afloat, then the way out is liquidation.

There are two types of liquidations – the easier option is if all the members can agree that there is a financial problem, and a special resolution is taken.

The other option is where one of the creditors lodges a case against the CC or Company. This is a lengthy process with great financial implications.


Very few people inform members or directors that if they owe money to a supplier, they must first check if they signed surety or not. If they did sign surety, and the CC or Company is liquidated, the supplier will hold the member or director personally liable for the money due for the goods supplied.

If the business has an overdraft facility, vehicle or credit cards at a banking institution, it is a given that the member or director would have had to sign surety (you will find it somewhere in the pack of papers that you signed when you opened the bank account). Therefore it is very likely that a sequestration will follow after the liquidation.

This is a name that no one wants to mention, especially if the necessary forms were not completed and the monies owing were not paid over monthly. The following must be mentioned – if you have money available, you have to pay SARS. The member or director acts as an ‘agent’ for the Government, and money received must be paid over to the Government. Unfortunately we do not live in a perfect world, and there are various circumstances that may lead to a business not paying over the money monthly. One-month arrears turns into two and then three and before long you are in a situation that you cannot get out of.  In the case of liquidation, SARS also forms part of your creditors.

Yes it is very sad, and with many of the liquidations processed, the only money owing is to SARS. If this is the case, then a sequestration won’t be necessary.

Please do not hide any of your assets – it is an offence in terms of Section 132 of the Insolvency Act. In the event that you need assets to proceed with an income, it may be possible to reach an agreement with the liquidator to purchase back the assets. If the liquidator is under the impression that assets are being hidden, then he/she may request that an investigation take place. The Master of the High Court will also be included in this process. It is advisable not to follow this route.


The cost of liquidation is R 13,500.00. Yes, there are companies that charge R 70 000 for this same service, but if you have that amount of money available, then you should rather pay some of your creditors.


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