Misuse Of The Liquidation Process

It has been said that in corporate litigation, a liquidation application is the equivalent of a powerful bomb.

The liquidation process is intended for the winding up of the affairs of an insolvent business entity or to bring an equitable end to its existence in certain prescribed circumstances.  In the case of companies, these circumstances are set out in the Companies Act, 1973.  The process is not meant to be used for enforcing payment of a debt or to enable its controllers to surreptitiously escape the consequences of their actions, such as to avoid paying creditors.

Yet, not infrequently, one finds winding up applications being used as a tool to an ulterior motive, typically to force the debtor to pay or as an endeavour on the part of those in charge of the business to sidestep creditors.