RESOLUTION TO WIND-UP A COMPANY
NB: Liquidation and deregistration are not the same thing.
Liquidation implies that the business is not able to pay its debts.
Liquidation further implies that the business will cease to operate (generally as a result of financial problems).
The liquidation may come about:
- as a result of a legal court process, or
- by a request of the creditors, or
- the company or close corporation may voluntary decide to be liquidated.
Voluntary Winding up of a company
A solvent company or close corporation may be wounded up voluntarily by members or by a creditor by the adoption of a Special resolution by the company or close corporation. The resolution must be filed with the CIPC by filing the CoR40.1 with supporting documents.
Before the resolution is adopted by the company or close corporation, the company or close corporation must set security with the Master of the High Court for the payment of the company’s debts within no more than 12 months after the start of the winding-up of the company or close corporation or obtain consent of the Master to dispense with security.
For consent to dispense with security the following information must be provided to the Master:
- A sworn statement by a director (if a company) or member (if a close corporation) authorised by the board of the company stating that the company or close corporation has no debts; and
- A certificate by the company’s or close corporation’s auditor, or a person who meets the requirements for the appointment of an auditor (if company does not have a auditor) stating that to the best of the auditor’s knowledge and belief and according to the financial records of the company or close corporation, the company or close corporation appears to have no debts.
- Note: It should be noted that the above requirements are determined by the Master itself and therefore, the above may not be correct. Therefore, the above only serves as a guide as to what the Master may require.
A company or close corporation remains a juristic person and retains all of its powers as such while it is being winded up voluntarily. From the beginning of the company close corporation’s winding-up, it must stop carrying on its business except for those activities required for the benefit of the winding up process. Also all the powers of the company’s directors or close corporation’s members cease, except to the extent specifically authorised,
- by the liquidator or shareholders in a general meeting in the case of winding-up by company, or
- by the liquidator or creditors in the case of winding-up by creditors.
A company or close corporation is dissolved as of the date its name is removed from the companies’ or close corporation register. The removal of a company or close corporation’s name does not affect the liability of any former director or shareholder (for close corporation its members) or any other person in respect of any act or omission that took place before the close corporation was removed from the register.
At any time after a company or close corporation has been dissolved, the liquidator or other person with an interest may apply to a court for an order declaring the dissolution to have been void, or any other order that is just and equitable in the circumstances and if the court declares the dissolution to have been void, any proceedings may be taken against the company or close corporation as might have been taken if the company close corporation had not been dissolved.
Legal personality is only terminated once the entity is “dissolved”.