South Africa Insolvency Court hands down first judgment with rare costs order against lawyers

The Johannesburg High Court announced the pilot of the Insolvency Court earlier this year as one of several recent initiatives to increase access to one of South Africa’s busiest commercial courts.

Mark Thomas, an expert in commercial dispute resolution at Pinsent Masons, said:  “Statistics SA has reported a 6% decrease in the number of liquidations in the first four months of 2025 when compared with the first four months of 2024.”

“Despite this, in 2024 it was reported that over 800 companies were liquidated in South Africa, with approximately 14% of those being court ordered compulsory liquidations,” he said.

“Liquidation has grave consequences for the company, creditors and employees. It is good news that Johannesburg now has a dedicated, and specialised, Insolvency Court to preside over these important and often complex cases.”

In its first recorded judgment, the court emphasised the importance of following procedural steps in winding-up proceedings and, when dismissing the case, barred legal practitioners for charging clients for a wasted court appearance that was a consequence of their failure to comply with strict legal requirements for compulsory winding-up applications.

Christopher Majuru, an expert in corporate and commercial litigation at Pinsent Masons, said: “This judgment is more than a procedural slap on the wrist.”

“It’s a reminder to legal practitioners and creditors alike: due diligence is non-negotiable and knowing the correct business address and employee presence is essential,” he said.

“The notice requirements of the Companies Act are not a mere formality: they are a constitutional right. Judicial resources are not infinite: the courts have limited time, and patience, when considering insolvency matters which, by their nature, have very serious consequences.”

The decision was made after the lawyer knowingly served a winding-up application at a residential complex, despite knowing the company’s business address. The same flawed method was also used to notify employees, which the court found failed to meet requirements of section 346(4A) of the Companies Act 1973. Under this provision, employees must be furnished with a copy of a winding-up application; trade unions representing employees must be notified; and an affidavit must be filed detailing how this was done.

With none of these requirements adequately met, the matter was removed from the court roll and a rare costs sanction ordered against the legal practitioners involved.