Liquidation & Other Debt Options

When it is foreseeable that your company / close corporation will not be able to pay its creditors as they fall due in the ensuing 6 months, there is a legal obligation on you to liquidate the company.

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Company Debt

Under the South African law, there are 15 options when your company or close corporation is in debt.

 

 

The new companies act’s profound influence on the liability of Members and Directors:

The new Companies Act No. 71 of 2008 came into effect on May 1, 2011. Before the New Law came into effect, the Old Companies act placed no direct obligation on directors and members when a company / CC were in financial problems.

Section 129(7) of the New Act (As amended by Section 82 of Act 3 of 2011) provides that if the directors of a company has reasonable grounds to believe that the company is in financial distress, they must either:

  1. place the company under “Business Rescue”, or;
  2. Liquidate the company, or;
  3. send a notice to all shareholders, creditors, employees and trade unions that the company is in financial problems and give reasons why the company is not liquidated or placed under Business Rescue.

If the above are not met, it is a criminal offense.

Under the new Act, a director / member may no longer “just wait and see”, he must do something about it.

Will my company / CC liquidation be successful?

His Honourable Appellate Judge Zullman has made the statement that if a company is not successful, you have the obligation to ‘take it to the grave’. The Court will consider the position of employees, creditors, shareholders, as well as the benefit / disadvantages that would hold for the trading environment, when considering if a company should be liquidated. Furthermore certain formalities need to be complied with.

Creditors obviously have a right to oppose the liquidation.

Our firm has handled more than a three thousand liquidations and each application was successful.

 

Our Attorneys

Danie Potgieter
Danie PotgieterProkureur
Owner and Prinsipal of the Firm. Danie has a formidable knowledge of Tax Law, Insolvency Law and Corporate Structuring.
Johann Pepler
Johann PeplerProkureur
Johann has finished his Masters degree in Insolvency law. He has the academic expertise that the law profession requires. He has a head for business and a ability to handle the most difficult of law questions.
Breyten Potgieter
Breyten PotgieterProkureur
Breyten is a specialist in Corporate Structuring (Asset Protection), Insolvency Law, Tax Law and Trusts. He is a partner of Danie Potgieter Attorneys and has knowledge and experience that far surpasses his age in years.

Read More about Liquidation

Terminology

Company Debt Options

FAQ’s

During & After Liquidation

Employees, Creditors & SARS

Dispositions

Just Interesting

Criminal offences

Terminology:

Liquidation Definition:
What is the difference between “sequestration”, “bankruptcy”, “liquidation”, “insolvency” and “surrender of estate”?
What is a: “Trustee”, “Liquidator” and “Curator”?
Who is “The Master of the High Court”?
What does “Debt Counselling” mean?
What does “Sequestration” mean?
What is a Secured creditor?
What is a “benefit for creditors” and how is it calculated?
What is a Preferent creditor?
What does the term “concurrent creditors” mean?
What does “contribution” mean?
I feel guilty!
I fear the unknown?

Options:

What are my Company / CC’s options if my Company / CC’s Close Corporation can’t pay its debt.
Pay your company’s debt! – (Option 1)
What does “Consolidation” mean? – (option 2)
What does “Moratorium” mean? – (option 3)
What happens if I sit back and wait? – (option 5)
Sell shares- (option 7)
What does “Private Liquidation” mean? – (option 9)
What does “Voluntary Distribution” mean? – (option 10)
Liquidation- (option 11)
Deregistration- (option 13)
Compromise (Section 311 of the Companies Act) – (option 14)
Judicial Management – (option 15)
Company Rescue – (option 15a)

To be considered before you decide on Liquidation:

Who may apply for the liquidation of a company?
Under which circumstances will the court grant a Liquidation Order?
How do I put my ducks in row before the liquidation application?
Will my Company / CC’s Application for Liquidation succeed?
Which Attorneys should I use?
Does anyone care about my business?
What do I tell my Company / CC’s creditors once I have decided to liquidate?
Which attorneys should I use and why?
Will I be liable for the debts of my Company / CC because I am the director / member?
Must I keep up payment of my Company / CC’s municipal levies after I have given instruction to my attorney to liquidate?
Must I keep on paying water and lights after I have given instruction to liquidate?
Am I allowed to set up a new company / close corporation after liquidation of my Company / CC’s?
What is the effect of my Company / CC’s liquidation on a lease agreement?
Can I buy back the company’s assets after liquidation?
What happens to my Company / CC’s insurance policies?
Someone from the bank has called me and “they” want to collect my Company / CC’s car because the payments are in arrears. Must I hand it over?
Will my Company / CC’s Company / CC’s Application for Liquidation succeed?
There is no “benefit for creditors” – can I still liquidate my Company / CC’s Company / Close corporation?
Will my Company / CC’s name be put on a credit bureau if my Company / CC’s company is liquidated?
Am I liable for debts of the company/close corporation/business trust?
How long will I be able to stay on in the house which falls into my Company / CC’s company’s insolvent estate?
How long will I be able to use my Company / CC’s company’s car which is under a finance agreement?
Can I be jailed for not paying my Company / CC’s debt?
What can a creditor do if I do not pay my Company / CC’s debt?
Why don’t I simply wait for my Company / CC’s creditors to liquidate me?
How does the Liquidation process work?
What is the role of the Liquidator in my life after Company / CC’s liquidation?

During the Liquidation Process:

How long does the process take?
Should my Company / CC’s Company keep on paying its creditors after I have given my Attorneys Instruction to liquidate?
Can creditors oppose the liquidation application.
Should I attend court when the application for liquidation is presented?

After the Liquidation:

What are my obligations after liquidations?
I have forgotten about one or two small creditors and they are no mentioned in my application for sequestration, will I be held liable to pay them?
How long does the winding up of my Company / CC’s estate take?
What are the consequences of liquidation?
What are my obligations before during and after liquidation?
How do I prove that stuff does / does not belong to my Company / Close Corporation?
What is the position regarding assets or debt that I have in other countries than South Africa?
What about my company / close corporation’s assets in other countries?
How does the liquidator get paid?
What about court actions pending against my company / close corporation?
My company / close corporation have instituted legal action against a third part – what happens after liquidation?
If the Liquidator does not want to proceed with legal action after the Liquidation Order has been granted, what is my Company / CC’s legal position?

Employees, Creditors & SARS:

I have not heard from a creditor for more than 3 years. Is the debt written off?
I did not even know that they took judgment against me!
Can a judgment against me be set aside?
What about parking tickets, television licences, water accounts etc?
My company issued cheques which were not honoured – what is the legal position?
What do I tell the Company / CC’s creditors?
What is the position of people who work for me?
What claims do employees have after the liquidation order has been granted?
Parking tickets, Television licenses, speeding fines etc?
My Company / CC’s owes VAT (value added tax) – will I be held liable?
What is the position of my Company / CC’s UIF?
My Company / CC’s has deducted UIF from its employees and the monies have not yet been paid to SARS!
My Company / CC’s Company has failed to pay Company tax, LBS, skills development levy and other forms of taxes. What can “they” do to me?
“SARS’s 4 types of Customers”!
What happens at SARS?
At the time of my Company / CC’s liquidation I owed SARS VAT (value added tax)?
What can a creditor do if your Company does not pay its debt?

Dispositions:

What is meant by a “disposition” in the Insolvency Act?
I have heard that all dispositions that I have made longer ago than six months before my Company / CC’s liquidation was granted is safe. Is this true?
What are the so called “voidable dispositions”?
What are the categories of “voidable dispositions”?
What is a disposition without value?
What does voidable preference mean?
What does Undue preference (Section 30) mean?
What does “collusion” mean? (Section 31)
What is meant by a voidable transfer of business?
Should I start a business on someone else’s name after my company / close corporation was liquidated?
Am I allowed to apply set-off before or during liquidation?

Just Interesting:

Can’t I simply hide my Company / CC’s company’s assets and then say that I have lost all my Company / CC’s money at Monte Casino?
What is an insolvency inquiry?
I have a purchaser who is interested to buy my Company / CC’s immovable property?
My Company / CC’s company / Close corporation own an undivided share in an immovable property – how is this dealt with?
Who appoints the liquidator and how does he get appointed?
I have received a subpoena to appear in Court. Must I still appear in Court after I instructed my attorney to attend to my Company / CC’s liquidation?
What is a bank mandate and why is it important?

Criminal offences:

Trading In Insolvent Circumstances
What can happen to those who helped me hide the company’s assets?
Under which circumstances can my Company / CC’s liquidator lay criminal charges against me?