When a business is liquidated, are persoal assets also sold?
FAQs - Businesses and Liquidation

A business is either a legal entity or not. Legal entities are usually either Close Corporations (with the abbreviation CC or BK at the end of their names) or Private Companies (with the abbreviation Pty Ltd at the end of their names). These legal entities are registered with the Registrar of Companies (CIPRO) in terms of either the Closed Corporations Act or the Companies Act. Businesses that are not legal entities are a Sole Proprietor and a Partnership. These businesses are not registered with the Registrar of Companies.

Thus, businesses can basically be divided into the following categories:

  • a Close Corporation (CC or BK); or
  • a Company (PTY LTD); or
  • a Sole Proprietor; or
  • a Partnership.

If a business is one of the first two, personal assets will not be realized as a Close Corporation and a Company affords the Members / Directors limited liability. Normally, unless you signed personal surety with a creditor, the creditor will only be able to claim against the legal entity and the claim will be limited to the assets of the legal entity. Your liability towards creditors is limited to what the legal entity owns.  In this case the legal entity can be "declared bankrupt"  by way of a liquidation application to the relevant court, or by registration of a special resolution.

If however, the business was not a legal entity, e.g. either a sole proprietor or partnership, you will not have the advantage of limited liability and creditors of the business will be able to claim their moneys from you in your personal capacity as well. The business can therefore not be liquidated and you will be facing personal bankruptcy as a possible debt solution if you are unable to settle the debts in your personal capacity.