Post-liquidation trading
A liquidation order does not always mean the lights go off. Where continued trading — whether to a going-concern sale, to complete contracts, or to achieve better realisation of assets than an immediate sale would — is expected to yield more for creditors, the liquidator may trade the business under statutory authority. It is a controlled operation with a defined end point.
Why trading on can beat an immediate wind-down
Continued trading serves creditors in more than one way. In some matters it enables a sale of the business as a going concern — plant sold as a functioning production line, with its workforce, licences, order book, and supply relationships intact, attracts a fundamentally different class of buyer to the same plant sold as separated lots. In others the objective is not a going-concern sale at all, but an orderly wind-down: contracts run to completion rather than cancelled and provable as damages claims, work in progress finished rather than written off, seasonal or perishable stock realised at natural sale points, and specialised assets marketed while the operation around them still gives context to their value. The common thread is that the projected realisation from trading materially exceeds what an immediate sale of the assets would yield.
Trading on is not the right answer everywhere. It requires funding, a defensible commercial rationale, tight controls, and an honest view of whether the operation can trade without deepening the loss. Where that view is negative, we say so and realise the assets on the best terms available. Where it is positive, the decision has to be made and implemented quickly — usually in the first days after appointment, while the workforce, customers, and suppliers are still there.
Authority to trade
A liquidator may not simply continue the business. Under section 386(4) of the Companies Act 61 of 1973, carrying on or discontinuing any part of the company's business is a power that must be exercised with authority — obtained from creditors and members by resolution at a meeting, or from the Master of the High Court, or from the court. Because the first meeting of creditors is usually weeks away, urgent interim authority from the Master is a routine early step in any matter where trading has to continue from day one. The scope, duration, and funding of the authority need to be framed carefully, and extended before it lapses.
Running a business inside an insolvent estate
Trading in liquidation is a controlled operation with a defined end point — a going-concern sale, completion of the contracts and realisations for which trading was authorised, or an orderly cessation once the value has been captured. Our practitioners manage it on the following basis:
- Immediate stabilisation — securing premises, stock, and records; establishing what is encumbered and what is held on reservation of ownership; and identifying which contracts and licences are critical to trading.
- A separate trading account — post-liquidation trading is ring-fenced and funded so that trading creditors are dealt with as costs of the estate rather than mixed into pre-liquidation claims.
- Employees — contracts of employment are suspended on the granting of a winding-up order under section 38 of the Labour Relations Act 66 of 1995, and the liquidator must consult before terminating. Where trading continues, we retain the employees needed to run the operation and engage with employees and their representatives on that basis. Where a going-concern sale follows, section 197A governs the transfer.
- Secured creditors and funders — bondholders, notarial bondholders, and cessionaries have a direct interest in whether trading preserves or erodes their security. We put the trading case to them early, with numbers.
- Weekly reporting and a hard stop — cash forecasting against actuals, so the decision to continue is re-taken deliberately each period rather than by inertia.
- Defined exit — a structured process run to a timetable. Where a going-concern sale is the objective, the business is marketed while it is still trading, which is when it is worth most. Where the objective is contract completion or improved asset realisation, trading continues to the point at which the case for it falls away, and then stops.
Why Westrust
Post-liquidation trading is one of the most operationally demanding areas of insolvency practice and one of the smallest in terms of practitioners who do it properly. It is a long-standing part of our practice: our practitioners have traded manufacturing, agricultural, retail, hospitality, and services businesses within liquidated entities, in commercially sensitive circumstances where discretion mattered as much as execution.