Closing a business well is a real skill and almost nobody plans for it. Done properly it takes a few months and ends cleanly. Done by simply stopping, it produces a company that still exists, still accrues obligations, and surfaces years later attached to your name.
Stopping is not closing
A company that ceases trading remains registered. It still owes annual returns. SARS still expects returns, even nil ones. The bank account still exists. Eventually the CIPC begins deregistration for non-filing, which is not the same as a proper closure and leaves loose ends behind it.
The obligations do not stop because the activity did.
The order to do it in
- Tell people. Customers, in enough time for them to make other arrangements. Staff, following a proper process — ending employment because a business is closing is a retrenchment and has its own requirements. Suppliers, before the final orders.
- Collect what you are owed while you still have a relationship and the standing to ask. Debts get much harder to collect once it is known you are closing.
- Pay what you owe, or reach documented arrangements. Employees first, and employees' tax and UIF withheld from them absolutely first.
- Sell the assets. Equipment, stock, vehicles. Also consider whether the business itself is worth more than its parts — a customer list, a name, a contract book has value to somebody, and closing is not always the best available outcome.
- Settle with SARS and file final returns. This includes deregistering for VAT and as an employer where applicable.
- Close the bank account last, once everything has cleared.
- Deregister the company with the CIPC, formally, once there are no assets and no liabilities.
The things that follow you
Personal surety is the big one. If you signed personally for a lease, a loan, a vehicle or a supplier account, closing the company does not extinguish that debt — it simply removes the entity that was between it and you. Go through everything you have signed and know which of these exist before you decide anything.
Employees' tax and UIF withheld and not paid over can attach to directors personally. So can liability for reckless trading if the company continued to incur debt while insolvent.
And keep the records. There are retention periods for company and tax records, and they outlive the company. The person who needs them in three years is you.
If there is not enough to pay everyone
Stop and take advice before distributing anything. Where a company is insolvent there is an order in which creditors rank, and paying the ones who are shouting — or paying yourself back a loan you made to the company — can be reversed and can carry personal consequences.
This is the point where doing it yourself stops being sensible.
Afterwards
Closing a business is not a moral event, and it is worth saying plainly: most people who close one go on to run another, and they run it better. The thing that makes the difference is finishing properly rather than walking away, because unfinished obligations are what limit what you can do next.
General guidance, not legal, tax or financial advice. Retrenchment, insolvency and the order of creditors are areas to take proper advice on.