Corporate insolvency & liquidation
Information for company directors whose businesses are in financial distress.
If your business is unable to meet its debts as they become due, it's important that you seek advice to find out more about your options.
Definition of insolvency
A company is insolvent when it is unable to pay all its debts when they are due.
A company director has a responsibility to ensure that the company does not trade while it is insolvent.
What to do if you think your company may be insolvent
Different types of corporate insolvency
The three most common corporate insolvency procedures are liquidation, voluntary administration and receivership:
- Liquidation is a process which results in a company being shut down. All the company’s assets are sold, and the money raised is used to repay its debts. The term ‘winding-up’ is also used. Read more about the liquidation process
- The purpose of a voluntary administration is to rescue – if possible – a company that’s in financial difficulty. A voluntary administrator is appointed who takes control of the company and manages its affairs until the creditors decide the company’s fate.
- Receivership is a process which entitles a secured creditor to appoint an insolvency practitioner as a receiver to a company. The receiver’s role is to take control of the secured assets to repay the secured debt. The loan agreement gives the creditor a right to appoint a receiver under certain conditions.
Small business restructuring
A new process commenced on 1 January 2021, called small business restructuring. The purpose of this new process is to allow eligible small businesses to compromise their debts with their creditors' agreement.
It also allows for business owners to remain in control of their business during the restructuring period. Read more about small business restructuring
Small business owners & bankruptcy
Do you own a small business (Pty Ltd) that is in financial difficulty? If your company goes bust and you’ve given personal guarantees on your business loans, you may need to look at bankruptcy for yourself.
This fact sheet explains more
Beware of dodgy advisers!
It's not unusual for dodgy advisers to contact company directors who are in financial distress. Don't get sucked in.
Get help from a qualified expert
An ARITA Professional Member can provide the right advice and guidance around corporate insolvency. The first consultation is usually free.