Liquidation by means of special resolution in South Africa is a legal process that allows companies to wind up their affairs and distribute their assets among creditors and shareholders. This procedure is governed by the Companies Act of 2008 and provides a structured and orderly approach to the dissolution of a company.
Liquidation is typically initiated when a company is unable to pay its debts or when it is no longer viable to continue its operations. It is a serious step that requires careful consideration and the shareholders’ passing of a special resolution. A special resolution is a formal decision made by at least 75% of the voting shareholders, either in person or by proxy, during a general meeting of the company.
The process begins with the appointment of a liquidator who is responsible for managing the company’s affairs during the liquidation process. The liquidator is usually a qualified professional, such as an attorney or an accountant, who has the necessary expertise to handle the complexities of the liquidation. We at SVN Attorneys are ready to assist in this regard.
Once appointed, the liquidator takes control of the company’s assets and liabilities. They assess and value the assets, settle outstanding debts, and determine the order in which creditors will be paid. The liquidator also ensures that the liquidation process is conducted in compliance with the Companies Act and other relevant laws and regulations.
During the liquidation process, creditors are given the opportunity to submit their claims to the liquidator. The liquidator reviews these claims and, based on the available funds, distributes the proceeds of the company’s assets to the creditors. Shareholders, on the other hand, are typically last in line to receive any remaining funds after all creditors have been paid.
Liquidation by means of special resolution provides a transparent and structured framework for the dissolution of a company in South Africa. It ensures that the company’s affairs are wound up in an orderly manner, and creditors and shareholders are treated fairly and in accordance with the law. However, it is important to note that liquidation should be seen as a last resort, and companies should explore other options, such as business rescue, before considering this course of action.
