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J Vorster, AJ
[1] The applicant seeks the liquidation of the respondent on the basis of an alleged
unpaid indebtedness arising from an oral agreement concluded during or about
August 2022. In terms of that agreement, the respondent purchased livestock
on auction from the applicant at its instance and request. It is alleged that, over
the per iod September 2022 to June 2024, the respondent incurred
indebtedness to the applicant in an amount of approximately R757,708.00,
supported by a statement of account and a series of written acknowledgements
of debt signed during 2023 and 2024 reflecting a total indebtedness of
approximately R758,450.00.
[2] The applicant alleges that, notwithstanding certain payments and credits
applied to the account, a balance of approximately R697,707.98 remains due
and payable. A statutory demand in terms of section 69 of the Close
Corporations Act was served on the respondent on 2 December 2024, and it is
contended that the respondent has failed to discharge, secure, or compound
the debt to the applicant’s satisfaction. On this basis, the applicant contends
that the respondent is unable to pay its debts, alternatively that it is
commercially insolvent.
[3] The respondent opposes the application on the basis that it is not insolvent,
either factually or commercially. The respondent denies that the applicant has
established insolvency and contends that the allegations in the founding
affidavit are largely conclusory. In support of its position, the respondent
annexes financial statements for the 2021, 2022 and 2023 financial years,
which, it is contended, demonstrate that the respondent’s assets exceed its
liabilities and that it remains solvent.
[4] The respondent disputes the factual basis of the alleged indebtedness. In
particular, it denies that it purchased livestock as alleged and challenges the
correctness of the applicant’s statement of account. It further disputes that the
correctness of the applicant’s statement of account. It further disputes that the
documents relied upon by the applicant constitute valid acknowledgements of
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debt. The respondent avers that various payments were made to the applicant
during 2024 and early 2025, which have not been properly accounted for,
thereby reducing or extinguishing any alleged indebtedness.
[5] The respondent further contends that it holds assets of substantial value,
including immovable property which has been placed on the market and is said
to have a value in excess of R4 million. It is accordingly denied that the
respondent is unable to pay its debts. The respondent also raises procedural
concerns, including that it employs staff who have not been served with the
application. On this basis, the respondent submits that the application falls to
be dismissed with costs.
[6] As referenced earlier herein, the applicant served a demand in terms of section
69 of the Close Corporations Act. As a result of the respondent’s Failure to
satisfy the demand it is deemed unable to pay its debt. The application is not
based on the respondent’s factual insolvency, but rather its commercial
insolvency.
[7] The difference between factual and commercial insolvency is important.
Commercial insolvency refers to an inability to pay debts from available cash
resources. Factual insolvency refers to a comparison between assets and
liabilities.
1 The liquidation application is based on the respondent’s commercial
insolvency – i.e. its inability to pay its debts from available cash-flow.
[8] By reason of the respondent’s failure to comply with the demand served in
terms of section 69, it is deemed to be unable to pay its debts. In those
circumstances, the respondent bears the evidential burden of placing facts
before the Court to demonstrate that it is, notwithstanding the deeming
1 Boschpoort Ondernemings v ABSA Bank 2014 (2) SA 518 (SCA) at [21] and [22].
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provision, commercially solvent. 2 In an attempt to discharge that burden, the
respondent relies on its annual financial statements for the reporting periods
ending February 2021, 2022, and 2023. Before considering the content of those
statements, it is necessary to record that the respondent has not disclosed its
financial statements for the 2024 and 2025 reporting periods, and no
explanation is furnished in the answering affidavit for this omission.
[9] It is necessary to distinguish between the differing levels of assurance
associated with annual financial statements, depending on the nature of the
engagement undertaken. Financial statements that are audited are subjected
to an independent examination conducted in accordance with prescribed
auditing standards, with the result that the auditor expresses a positive opinion
as to whether the statements fairly present the financial position of the entity.
By contrast, reviewed financial statements are subjected to a more limited form
of scrutiny, typically involving enquiries and analytical procedures, and result
only in the expression of a negative assurance, namely that nothing has come
to the practitioner’s attention to suggest that the financial statements are
materially misstated. Compiled financial statements, however, involve no
independent verification or assurance at all; they are prepared on the basis of
information supplied by management, without the practitioner expressing any
opinion or conclusion as to their accuracy. The evidential weight to be attached
to such statements must accordingly be assessed with due regard to the level
of assurance underpinning them.
[10] The financial statements annexed to the answering affidavit are compilation
reports and therefore offer the lowest possible assurance of accuracy. For
purposes of this judgment, it is merely necessary to refer to the 2023 financial
2 Ter Beek v United Resources CC an Another 1997 (3) SA 315 (C) at 331F: “In view of the fact that in
terms of s 68 of Act 69 of 1984 a Court's discretion in regard to the winding -up of a close corporation
operates even in those instances where the application for winding-up is based on a deemed inability on
the part of the close corporation to pay its debts, I incline to the view that the provisions of s 69(1) of Act
69 of 1984 are merely supplementary (ie extending what the subject-matter includes) and prima facie (ie
rebuttable). Accordingly, first respondent is not precluded from assailing the 'conclusion of law' … which
results from a failure to appropriately respond to a statutory demand in terms of s 69(1)(c) of Act 69 of
1984.”.
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statements, which reveal that during the 12-month trading period the
respondent’s commercial activities resulted in a loss of -R85,903.00, and that
the respondent had a negative cashflow position of -R121,384.00 at the end of
the financial year.
[11] In my judgment, the evidence advanced by the respondent is insufficient to
displace the presumption arising from its failure to comply with the section 69
demand, and an order for the respondent’s liquidation should be granted.
[12] In respect of the additional payments referred to by the respondent, the
evidence reveals that there have been limited further payments of small
amounts. A statement annexed to the replying affidavit as “RA1” reflects that,
even when these additional payments are taken into account, a capital liability
of R667,707.98 remains. As such, the limited additional payments do not assist
the respondent. If anything, these payments support the applicant’s contention
that the respondent is unable to pay its debts.
[13] Lastly, the respondent placed service of the liquidation application on its
employees in dispute. First, it must be kept in mind that in accordance with
section 197B of the Labour Relations Act, the respondent had a duty to bring
the liquidation application to the attention of its employees. Second, the
applicant produced evidence that on 18 February 2025, the sheriff served the
application on employees in the manner prescribed by section 346(4A) of the
Companies Act, 61 of 1973. Consequently, this defence must fail.
[14] What remains to be considered is whether I should grant a final or a provisional
liquidation order. The respondent opposed the grant of a winding-up order. The
issues have been fully ventilated, and the respondent has put nothing forward
to persuade me that further relevant facts would be forthcoming if a rule nisi
were issued.
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3 Johnson v Hirotec (Pty) Ltd 2000 (4) SA 930 (SCA) at [9].
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[15] The following order is made:
1. The respondent, F and A Properties CC (registration number:
1991/015446/23), is placed in final liquidation.
2. The costs incurred by the applicant in this application shall be costs in
the administration of the respondent’s winding-up and shall be taxed on
scale C.
J VORSTER, AJ.
Acting Judge of the High Court
Date heard: 6 May 2026.
Judgment date: 6 May2026.
Appearances:
For the applicant:
Counsel: C LH Harms
Instructed by: Mills & Groenewald Attorneys
For the respondent:
No appearance.