Liquidation is the process by which a company is brought to an end and the assets and property of the company are redistributed to pay creditors and shareholders, based on the priority of their claims. Liquidation usually occurs when a company is insolvent, meaning it is unable to pay its obligations when they are due.
Liquidation can either be the end of a Chapter in your life, or it can be an enabler for the new Chapter in your life. We at Clear Future always strive to make Liquidation an enabler for your new Business Plan.
Liquidation explained in short:
Liquidation is the process by which a legal entity is closed down, because the business has become insolvent.
When does a Director apply for liquidation?
In general the Directors will apply for Liquidation under the following circumstances:
- The Business is insolvent, the Liabilities exceed the Assets. Remember if a Business conduct trading while factually insolvent, you as a Director will be held personally responsible for any Debt incurred.
- When the Business runs into Liquidity problems or it is difficult to pay Trade Creditors and the situation will not better on the short term.
- The Business has stopped trading.
The Liquidation process will either be conducted through a High Court application, or by way of a director resolution. The process is Unique for each Business, and the process to be followed will be dictated by the Risk Profile associated with the Business.
The following is required:
The Registration documents of the business.
The Directors/Members Id Documents.
List of Assets and Liabilities.
SARS registration document.
- We will consult with you to obtain a better understanding of your needs and then come up with a plan of action that will bring about the best possible outcome. We are Business people. All processes must make economic sense, else why do it? It is always important that we drive towards a desired outcome, and in the majority of cases Liquidation is just part of the process. The liquidation process is fast and can take less than two weeks to resolve. We will only begin this process once we have consulted with you and have agreed upon the outcome
Business Rescue vs Liquidation?
Business Rescue is the Debt Review for a Legal entity. A Moratorium is obtained in order to give the Business an opportunity to propose and agree a new business plan and actions with its Creditors.
Business Rescue is an expensive process. An external Business Practitioner and team has to be appointed. The minimum cost for a Business will be R80 000 per month for a minimum of 6 months.
That is why Business Rescue has been designed for medium to large organisations, not for small Businesses. Quite often in smaller Businesses, Liquidation is in any case inevitable once the Business is running into serious Liquidity problems.