How to Wind Up Your Business That’s No Longer Trading

Closing a business is a serious and often final step for many entrepreneurs. Whether you’re facing financial difficulties or simply transitioning to a new venture, it’s essential to properly wind up your business in compliance with South African regulations. Below is a comprehensive guide on how to proceed with winding up your business, including the crucial steps to deregister with CIPC and SARS, and the differences between liquidation and deregistration.

1. Deregistering with CIPC
   Deregistration with the Companies and Intellectual Property Commission (CIPC) is an essential step when winding up your business. Deregistering means that your business will no longer be legally recognised as a registered entity, and it cannot continue to operate. The CIPC deregistration process is typically available if the business has no ongoing liabilities, employees, or assets.
   • Steps to Deregister:

1. Apply for deregistration via CIPC
2. Ensure the company has no outstanding tax obligations, employees, or assets.
3. Submit the deregistration request and await confirmation.

2. Closing Tax Accounts with SARS
   Once you have deregistered with CIPC, you must proceed to deregister with SARS for various tax types such as VAT, PAYE, and any other relevant registrations. This will ensure that your business is no longer liable for tax obligations post-closure.
   • Steps to Deregister with SARS:

1. Request SARS deregistration.
2. Ensure all tax filings are up to date before proceeding with deregistration.

3. Liquidation vs. Deregistration: Understanding the Difference

Liquidation and deregistration are often confused but are fundamentally different processes.
• Liquidation occurs when a business is unable to pay its debts and is typically a last resort. It can be initiated:
o Through a court process.
o Upon request by creditors.
o Voluntarily by the company itself.
• Deregistration, on the other hand, involves removing your business from the official register with CIPC and is typically initiated when a business has no debts or ongoing operations.

4. Voluntary Winding Up (Solvent Companies)

For solvent companies, the voluntary winding-up process begins with a resolution passed by the company’s members or creditors. A special resolution must be filed with CIPC and may require the company to set security for any debts that need to be paid within a year or obtain the Master of the High Court’s consent to waive security.
Steps for Voluntary Winding Up:

1. Pass a special resolution among the company’s members or creditors.
2. File the CoR40.1 form with supporting documents to CIPC.
3. If no debts exist, provide evidence through a sworn statement and auditor’s certificate.
4. Stop all business activities except those related to the liquidation.
5. The company retains its legal powers until officially dissolved.

5. Final Considerations
   • Notify Stakeholders: Inform clients, employees, and suppliers about the business closure and settle all outstanding payments.
   • Clear Outstanding Debts: Ensure that all financial obligations, including taxes and creditors, are resolved.
   • Retain Documents: Retain business records for at least five years post-closure for legal and tax purposes.

The process of closing a business can be complex, especially if you are dealing with liquidation, outstanding debts, or other legal matters. It is advisable to consult a tax professional or legal advisor to ensure you comply with all relevant regulations and to navigate the process smoothly.
For further details on deregistration and liquidation, you can consult with CIPC and SARS or seek legal counsel to help guide you through the winding-up process.