This blog is co-authored by Sakhile Ngobe, a candidate attorney.
On 30 May 2025, the Supreme Court of Appeal (SCA) set aside a final winding-up order granted by the high court where the CIPC and the court had not followed the correct steps in the liquidation process.
The company in question is a public company that was established to provide small retail investors with access to investments in companies listed on the JSE.
The company did not meet Companies Act requirements imposed on it, including annual returns and annual financial statements. The CIPC issued compliance notices in this regard, but the company allegedly did not comply with those notices. The Companies and Intellectual Property Commission (CIPC) applied for the winding up of the company as a solvent company. CIPC alleged that the company did not comply with section 81(1)(f) of the Companies Act, 2008 (Companies Act) and, in the alternative, it was just and equitable to place the company into final liquidation.
The application was based on alleged persistent and serious non-compliance with the Companies Act, the company was accused of trading recklessly, endangering the interests of its shareholders and creditors, in addition, it was alleged that the company failed to prepare and submit annual financial statements over the several financial years. Finally, the company allegedly did not maintain a proper register of its securities, a key requirement for transparency and shareholder protection.
The high court ruled against the CIPC in that the grounds in section 81(1)(f) of the Companies Act were not satisfied regarding a winding up order sought by the CIPC. However, the high court decided that the company was insolvent on the basis of the audited financial statements for the 2018 financial year. It granted a final liquidation order. The high court granted a final liquidation order without first issuing a provisional order, which is the usual procedural safeguard.
The SCA held that, when the high court made the finding that the requirements set out in section 81(1)(f) were not met, that ought to have been the end of the matter. The high court had no discretion to effectively amend CIPC’s application by winding up the company on the basis that it was insolvent. The high court also erred in reaching a finding that the company was insolvent based on a case that CIPC did not rely on. The application was based on the winding up of a solvent company and not an insolvent company. The CIPC was not a creditor and therefore not an interested party under section 79(3) able to bring an application for winding up the company on an insolvent basis.
The SCA criticised the high court for disregarding the evidence of the company’s compliance efforts, including a certificate issued by the CIPC itself on the submission of tax returns and a tax compliance certificate from the South African Revenue Service, and for failing to afford the company adequate notice by following the legal requirements for winding up. The SCA highlighted that the company had taken steps to rectify its non-compliance, including submitting annual returns and financial statements. The high court erred in relying on outdated financial statements without proper evidence of any current insolvency. The fact that the winding up of the company was granted by the high court without facts supporting that it was insolvent, called for the order to be set aside. The SCA emphasised the need for following every step in a liquidation process.
There is a majority and a minority judgment dealing extensively with a number of requirements and statutory provisions relating to the winding up of companies. The judgments are worth close attention by those involved in winding up decisions.