What does liquidation mean ?
Liquidation is the process of closing a limited company, selling assets and dissolving the company from the official CIPC register.
It is the process that your company faces if you have cash flow problems on a regular basis and creditors are threatening to take enforcement action. A compulsory liquidation is a form of liquidating a company which involves an application through the courts. It can happen when a winding-up petition has been issued by a creditor of an insolvent company, due to a debt not being satisfied.
Why might a company go into liquidation?
A company may go into liquidation when:
- There is a market decline, where the specific sector is no longer as profitable as when the company was founded;
- Large, repeat customers having themselves gone through an insolvency process;
- Core customers that accounted for large sections of revenue having gone to competitors;
- Unexpected bills that have caused strain on the cash flow of the company;
- A struggle to collect money from debtors to your company who are not paying their bills on time.