Understanding bankruptcy in South Africa is now more important than ever. Although people cautiously become optimistic, the economic outlook is far from rosy. This also means a higher risk of having to apply for bankruptcy as an individual or as a company.

With a drop to 132 companies filing for or having being declared bankrupt in June 2021, from 191 in May of 2021, as reported by Trading Economics, one can easily assume that things are looking up for businesses in the country. However, unemployment went up to 34,4% in the second quarter of this year as opposed to 32,6% in the first quarter, also reported by Trade Economics. This shows that the country’s economy is far from being perfect.

To this end, let us have a quick look at the basics for understanding bankruptcy in South Africa for companies and for individuals.


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A company does not need to have assets to be declared bankrupt. If the liabilities exceed its assets and it is unable to pay debts when these become due, then according to the Companies Act, the business must liquidate. However, if it is possible to bring it back to a state of solvency and doing so is in the public’s interest, the company can be placed under business rescue. In this situation, a business rescue practitioner is appointed who takes over the management of the company.

Restructuring can follow in addition to agreements with the creditors. If the business is able to return to solvency, then it is a success. If not, the business must liquidate.

Here is more information on the liquidation process:


If the individual is unable to pay their debts when due and their liabilities exceed their assets, then the individual is insolvent. A creditor can apply for the compulsory sequestration of the individual or the person can apply for the voluntary surrendering of their estate. This entails a court application. If awarded, then the assets of the individual are sold on auction and the proceeds are used to pay for the sequestration, curator costs, and the minimum benefits required for the creditors, which come to 20 cents out of the rand. Visit our sequestration process section for more information.

In both instances, it is essential to understand the process involved, implications, costs, and pitfalls to avoid. Advantages include being debt-free and able to start fresh without creditor harassment. However, insolvency proceedings do cost money, and in the individual’s case, their credit record shows that they have been sequestrated. To regain full financial and legal decision-making capacity, they must apply for rehabilitation. In the company’s case, employees will lose their jobs. If the directors have signed surety for the company’s debts, then they must pay for such or sequestrate. Correct information is key to accurate decision making.


Both companies and individuals face difficult economic times. Rather than taking matters into your own hands without expert legal advice, seek legal guidance. Get in touch with the attorneys of Insolvency Care for help in gaining a better understanding of bankruptcy in South Africa and the best route to follow if you or your company are in financial trouble.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Call on our attorneys for legal advice, rather than relying on the information herein to make any decisions. The information is relevant to the date of publishing.