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Process of liquidating a business

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Learn about the liquidation process...

To access earlier articles, click Advanced Search and set an earlier date range. Please enter the email address that you used to register on Polity. Your password will be sent to this address. When a prospective business owner registers a new company, he or she does so with the confidence that they will make a success of that business.

However, despite the intention of setting up and running a successful business, unforeseen situations can Process of liquidating a business time have a negative impact on these good intentions, resulting in such a business ultimately failing.

This is particularly common with small start-up companies which statistically never make it past year one. When a company has exhausted all alternatives, it is recommended that it, or its creditors, apply for liquidation. The brief differences between such voluntary versus involuntary liquidation is outlined later on in this article. The liquidation process can be defined as the Process of liquidating a business in which a company voluntarily proceeds to declare itself as being insolvent or where a creditor of the company brings an application to court in order to have the company declared insolvent.

The result thereof is that the company may no longer proceed to operate its business. The South African law provides that a company can either voluntarily apply to the High Court to be liquidated or be forced into liquidation by its creditors or shareholders. This will be for payments to be made within a month period, commencing after the start of the winding up of the company, should it be required.

Liquidation Process

The result of winding up a company, is that the affected company ceases to conduct any business and as a consequence thereof is being removed from the Companies and Intellectual Property Commission CIPC registration database. Section 81 of the Act outlines the procedure that should be followed when a company is wound up based on an application by a creditor of the company.

This section provides for a variety of instances when an application can be used to wind up a company. The most contentious instance is when a creditor or a Process of liquidating a business of the company applies to the court for a liquidation order.

The court will initially grant a provisional liquidation order which results in the company being given an opportunity to oppose the liquidation order.

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