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Introduction
[1] This is an opposed application by FirstRand Bank Limited (“the Applicant”) for
the final winding-up of KDO Group (Pty) Ltd (“the Respondent”) , in terms of
subsection 344(f) read with section 345 of the Companies Act 61 of 1973 (“the
Act”), further read with Schedule 5 to the Companies Act 71 of 2008 (“the new
Companies Act”). The Applicant is a creditor of the Respondent. The application
is founded on the contention that the Respondent is unable to pay its debts.
Background
[2] The Applicant advanced R 3 062 215.00 to the Respondent in terms of a written
loan agreement (“the agreement”) . It is common cause that the Respondent
defaulted on its obligations under th e agreement by, inter alia , failing to pay
municipal charges on its property and by defaulting on a separate overdraft
facility with the Applicant. These defaults constituted an “Event of Default” under
clause 14 of the agreement, entitling the Applicant to accelerate the debt.
[3] A certificate of balance confirms that , as at 14 May 2024, the Respondent was
indebted to the Applicant in the sum of R 2 536 196.47 (“the debt” ). The
Respondent does not dispute the existence or the quantum of the debt.
[4] In accordance with subsection 345(1)(a)(i) of the Act, a demand for payment of
the debt was served on the Respondent at its registered office on 15 April 2024
and again on 22 April 2024. More than three weeks have elapsed since such
service and the Respondent has neglected to pay or to secure the debt to the
reasonable satisfaction of the Applicant.
[5] The Respondent opposes the application on the principal ground that it is
commercially sol vent. It alleges that it has secured tenants , receives steady
income and owns immovable property. No documentary evidence, such as lease
agreements, financial statements or bank records, ha ve been produced to
substantiate these bare assertions.
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The applicable legal principles
[6] It is trite that t he relevant winding -up provisions of the Act find application by
virtue of Schedule 5 to the new Companies Act. Subsection 344(f) of the Act
provides that a company may be wound-up by the court if it is “unable to pay its
debts”.
[7] A company’s inability to pay its debts is established in two primary ways:
7.1. A company may be commercially insolvent. This is a question of fact. A
company is commercially insolvent if it is unable to pay its debts as they become
due in the ordinary course of business, irrespective of whether its assets exceed
its liabilities. This is a “cashflow test”.1
7.2. Also, a company may be deemed to be insolvent. Subsection 345(1)(a) of
the Act creates a statutory, deeming provision. If a creditor, to whom a company
owes a liquidated sum of not less than R 100.00, has served a demand at the
company’s registered office and the company has , for three weeks thereafter,
neglected to pay or secure the debt, it is deemed to be unable to pay its debts.
[8] Where a creditor is undisputed and the debt is liquidated the creditor is
entitled, ex debito justitiae , to a winding -up order, save where the respondent
raises a bona fide dispute on reasonable grounds or shows solvency.2
[9] A certificate of balance i ssued in terms of a loan agreement constitutes prima
facie proof of the indebtedness. The evidentiary burden shifts to the debtor to
adduce evidence to contradict it.3
1 Badenhorst v Northern Construction Enterprises (Pty) Ltd 1956 (2) SA 346 (T)).
2 Standard Bank of South Africa v R-Bay Logistics [2022] ZAGPJHC 404).
3 Senekal v Trust Bank of Africa Ltd 1978 (3) SA 375 (A)).
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Provisional winding-up/final winding-up
[10] A provisional winding-up order is an interim order granted by way of a Rule Nisi.
This is where a prima facie case has been made out. It places the company into
provisional winding-up and calls upon all interested parties to show cause on a
return date why a final order should not be granted. It serves to protect the estate
pending a final determination.
[11] A final winding-up order is granted upon the return date if no sufficient cause is
shown why such an order should not be granted. It, inter alia, definitively places
the company into liquidation; terminates the powers of its directors and initiates
the process of realising assets for the benefit of creditors.
[12] In an opposed application w here the respondent’s defence is found to be
unsubstantiated and the statutory requirements for winding -up are conclusively
met the court may grant a final order outright (without first granting a provisional
winding-up order). This avoids unnecessary cost and delay, particularly where
there is no reasonable prospect of the respondent rehabilitating its financial
position. The practice directive of this Division in fact calls upon presiding Judges
(without limiting the court’s discretion) to grant a final-winding up order (even in
unopposed applications) whenever possible.
[13] The Applicant in this matter submits that this Court should grant a final winding -
up order without first granting a provisional winding -up order. This will be dealt
with at the appropriate stage in this judgment. At this juncture, it is appropriate to
note that when this Court heard the application for the winding -up of the
Respondent, no provisional order had been granted by another Court and this
Court did not grant such an order. In the premises, there has never been a Rule
Nisi issued in the matter. For some inexp licable reason, pursuant to the
application being heard, this Court purported to extend a Rule Nisi. Thereafter,
application being heard, this Court purported to extend a Rule Nisi. Thereafter,
same was extended by this Court on several occasions and is returnable on the
27th of February 2026. This, of course, was an error and amounts to a nullity,
since, as set out above, no provisional winding-up order has ever been granted
in this application and no Rule Nisi has ever been issued. Despite the aforegoing,
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this Court orders . as a matter of caution and to avoid any confusion, that all
orders made by this Court purporting to extend a Rule Nisi are set aside..
Discussion
[14] The following facts are established and largely common cause:
13.1. The Respondent is indebted to the Applicant in a substantial, liquidated
amount.
13.2. The debt is due and payable.
13.3 A statutory demand in full compliance with section 345 of the Act was
served and the debt has not been satisfied or secured. Consequently, the
Respondent is deemed to be unable to pay its debts in terms of subsection
345(1)(a) of the Act.
[15] The Respondent’s defence of commercial solvency is unsustainable. It consists
of bald, unparticularised allegations of steady income and ass et ownership,
wholly unsupported by any documentary evidence. This falls far short of the
evidentiary burden required to disturb the prima facie proof of indebtedness or to
rebut the deeming provision of section 345. In contrast, the Applicant has
provided a clear and unchallenged factual basis demonstrating the Respondent’s
default and inability to meet its obligations.
[16] The Respondent’s further contention that the application is an abuse of process
because there are “less drastic remedies” is without merit. A creditor’s election
to pursue its debtor via winding -up proceedings, where the debt cannot be
genuinely disputed and remains unpaid, is a legitimate exercise of its rights. The
existence of alternative claims and/or remedies does not render a liquidation
application abusive.
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Conclusion
[17] In the circumstances, the Applicant has established a clear case for the final winding-
up of the Respondent on the ground of deemed insolvency, which is reinforced by
strong evidence of commercial ins olvency. No bona fide dispute or evidence of
solvency has been presented. It is therefore in the interests of justice and of the
Respondent’s general body of creditors that a final winding-up order be granted. There
is no reason why th e liquidation process in this particular matter should be delayed.
This would only, inter alia, increase costs and would not be in the interests of the
general body of the Respondent’s creditors. In the premises, as this Court is entitled
to do, a final winding–up order should be granted.
Costs
[18] There are no reasons as to why the usual order that costs of this application be
costs in the winding-up of the Respondent should be deviated from. This Court
finds that such an order would be just and equitable.
Order
[19] This Court makes the following order:
1. The Respondent, KDO Group (Pty) L imited, is placed under final winding -up
in the hands of the Master of the High Court.
2. The costs of this application shall be costs in the winding-up of the
Respondent.
3. All orders made by this Court extending a Rule Nisi are set aside.