How To Close A PTY Company In South Africa
A company’s closure can be excruciatingly unpleasant. It symbolizes the death of your aspirations, the realization that all of your sacrifices—blood, sweat, and tears—have been in vain, and finally, the dissolution of the corporate family.
For many business owners, this has been life. According to research, up to 80% of all startups fail during the first two years, and the bulk of the remaining 20% fail over the next three years.
But many business owners fail to consider the legal obligations that come with having to shut down a company.
To prevent any issues in the future, it is crucial to make sure that all legal requirements are handled properly, from tax and contracts to handling employees and shareholders.
What is required in South Africa to shut down a business?
When a business or company goes through voluntary or involuntary liquidation, which is also referred to as “winding up,” it involves the sale of all assets, payment of creditors, issuing any leftover assets to the primary or parent firm, and then simply terminating the business or company.
How to shut down a business
Unregister the Company
This basically indicates that the company or close corporation is not conducting business and has no assets or liabilities, according to the South African Revenue Services (SARS).
Deregistration or liquidation are the two options for a company to shut down.
Both a business and a close corporation may be deregistered voluntarily or for failing to comply with rules.
Get Your Contractual Obligations in Order
Contracts may very well be the most challenging legal minefield for most businesses. Just as it is crucial to get your contracts correct while the business is open, you shouldn’t make the error of ignoring them when the business shuts down. Contractual obligations that go unfulfilled can easily haunt you.
This makes it crucial to comprehend them and treat them delicately while you wind down the company.
Deregistration has the effect of dissolving the business, which results in the termination of all contracts, the transfer of all property to the state as bona vacantia (ownerless commodities), and the impossibility of collecting any outstanding debts from the company.
Tell your employees.
The workers are any company’s lifeblood.Because employees are typically the ones who suffer the most when a business closes, it is crucial for the owner to manage employee-related concerns carefully.
This would involve things like informing employees well in advance of the company’s impending closure and ensuring that employee perks like retirement annuities and medical aids are properly handled.
Take care of the shareholders’ and directors’ liability.
The deregistration of the corporation has no bearing on the responsibility of any former director or shareholder for any act or omission that occurred prior to deregistration.
Delete your tax registration
The registered representative should go to the closest SARS branch once a business obtains confirmation from the CIPC that it has been deregistered and complete any remaining paperwork.Ensure that the company has been deregistered for all applicable taxes.
How long does it take the CIPC to deregister a business?
Deregistration that is voluntary typically takes less time; in accordance with the CIPC’s service requirements, this process takes roughly 10 days to process and a further four months to finish.
What distinguishes liquidation from deregistration?
Additionally, liquidation may result in its dissolution. Deregistration suggests that a company or close corporation (which has no legal persona or standing) ceases to be registered because it is no longer operating and has no ongoing assets or liabilities.
