Liquidation Bonds

Liquidation bonds are essential in the process of insolvency or security liquidation, ensuring the proper administration and accounting of a company's or estate's assets during the winding-up process. These bonds, also known as suretyships, guarantee that the liquidator or trustee will manage the assets correctly, providing a bond of security to the satisfaction of the Master of the High Court.

Why the Need for Insolvency or Liquidation Bonds?

Liquidation is the process of winding up a company
Sequestration is the process of winding up an estate of a person.

Both processes involve converting assets of the company/estate into cash to pay the administration costs of the company/estate and to distribute any residue to creditors of the company/estate who have proved claims. To protect creditors, both provisional and final liquidators and trustees are required to provide a bond of security in liquidation. Once a company/estate is liquidated or sequestrated the company/person no longer has the power to dispose of its property. The powers of the company/person are vested in the liquidator/trustee appointed by the Master of the High Court.

Understanding Bond of Security in Liquidation

Court applications launched to liquidate a company/sequestrate an estate involve a two-step process (a provisional order, followed by a final order). Accordingly, there is a need to appoint a provisional liquidator/trustee to look after the estate until the final order is granted and a final liquidator/trustee is appointed. These appointed individuals must furnish a bond of security for liquidation, guaranteeing their performance and adherence to legal requirements while in office.

The Role of Security Liquidation Bonds

The Provisional liquidator/trustee must ascertain the existence and whereabouts of assets of the company/estate and preserve them by taking physical control of them until a final liquidator/trustee is appointed. A bond of security ensures they perform their duties responsibly. The bond's value is set by the Master, based on the estate's asset value as of the liquidation or sequestration order date.

Shackleton Risk Management, through leading insurance providers, offers these bonds of security (also referred to as suretyship) that guarantee liquidators or trustees administer the assets under their control as legally required.

complete an application form

instant surety bond estimate

Ensuring Principal Liquidation Compliance

A suretyship differs from an indemnity policy, acting as an accessory agreement where the surety binds itself to the Master for the liquidator's performance. If the principal liquidator defaults, the surety covers the resulting loss and has recourse against the liquidator for amounts paid.

Managing Bond Liquidation Over Time

The bond of security may be reduced as the liquidation process progresses and assets are sold. Upon finalizing the estate, the bond should be reduced to zero, allowing the surety to be released from its obligations.

Shackleton Risk provides support across all provinces, helping clients manage their liquidation bonds effectively.

What You Will Require to Obtain a Liquidation Bond Through Us

An approved facility with the Insurer
Experience as a liquidator and/or membership with SARIPA or other insolvency association
To be listed on the Master's National List of Liquidators
Active Professional Indemnity Insurance throughout bonds issued by the Insurer.

Security bond premiums for liquidation or sequestration matters are set by the Master of the High Court. The liquidation bond premium is charged annually at a rate of 0.5%, with potential adjustments based on asset realisation by the liquidator or trustee. Our team’s expertise in the liquidation bond process offers peace of mind and asset security.

For more information or to set up a consultation, please contact your local broker: