Choosing to close your business can be a very difficult decision to make, but in some cases, it is the only option. And unfortunately, as the pandemic continues to wreak havoc across the globe, we’ve seen many small-to-medium size businesses having to close their doors. While this is not an easy topic to discuss, we’d like to make the process easier for you by giving you all you need to know.
How to close your business?
First things first, before you make any decision to close your business, we highly recommend you obtain professional advice from a lawyer and accountant.
There are two ways to close your business or company, these include deregistration or liquidation. The way in which you close the business will depend on the circumstances the business finds itself in. Let’s unpack each of them separately:
Deregistration: When a business or company deregisters with the Companies and Intellectual Property Commission (CIPC), it implies the business or company is no longer registered and has no legal standing since it’s not doing any business nor have assets or liabilities.
Liquidation: When a business/company undergoes a voluntary or compulsory liquidation (also known as the “winding – up” of a business/company) it involves the process of selling all the assets.
Liquidation or the “winding –up” of a business/company may happen:
- When a business/company is unable to pay its debts
- As a result of a legal court process
- By application of the creditors
- Voluntary (Where you willingly apply for liquidation)
- When the business owner decides to do something different, or even perhaps retires for a well-earned rest.
How to deregister your business?
Firstly, you’ll need to write to the Companies and Intellectual Property Commission (CIPC) confirming that:
- Your company or close corporation is not carrying on business or is dormant;
- Your company has no assets or there are inadequate assets for the business to be liquidated;
This must be signed by each active member of the business and your tax number must be included if you have one. The relevant supporting information must be attached to the letter. Visit the CIPC website here for more information on exactly what supporting information you need to attach.
How to liquidate your business?
The process of liquidation involves the following:
- Selling the company’s assets;
- Paying off the creditors;
- Issuing any remaining assets (if any) to the shareholder/s; and
- Closing the company.
Sometimes liquidation may be forced upon you by the creditors of the company through an application for the winding-up of the company. If you are in this situation, we strongly advise that you seek legal assistance.
When a company is placed under liquidation, it is placed under the control of a liquidator who then carries out the process of liquidation. You need to disclose everything to the liquidator. Once in the process of liquidation, do not try to deal with your company’s creditors yourself, leave that to your attorneys.
If you require any assistance regarding something written in this article, please do not hesitate to contact us.