Liquidation, reregistration and business rescue Flashcards
Solvent company: Voluntary
Process:
-Company directors file a specific resolution- sent to the CIPC- CIPC sends court order to the court
Securities:
-A security for payment of the company’s debts must be organised no more than 12 months after the start of the wind-up- consent from the court master to dispense with securities must be given.
- A sworn statement by directors that there aren’t any debts must be given
- certificate of confirmation by company auditor or who meets the requirements of a auditor must confirm there are no debts
Effects:
- Company remains a juristic person
- A liquidator is appointed
- Business stops unless required for the winding up of the business
- Director’s powers cease unless requested by liquidator or for the winding up of the company
Solvent company: Liquidation by court
- Company:
The company by a specific resolution needs to be wound up
OR
The company has requested its voluntary dissolution be continued by the court - Liquidation practitioner
The person appointed to rescue the company has requested liquidation on the grounds that rescue is not reasonable - Creditors
One or more creditors have applied for liquidation and the reasoning is just and equitable - Company, directors or shareholders
Have applied because the directors are deadlocked in the management of the company - Shareholders
The directors and those in charge are acting fraudulently or illegally
OR
They are misusing and wasting assets - CIPC
The directors, prescribed officers or other persons in control are acting in a manner that is fraudulent or otherwise illegal and the company failed to comply with the compliance notice
Liquidation of insolvent companies
Insolvents:
1) Statutory demand
A creditor who is owed more than R100 has served a statutory demand on a company and more than 3 weeks have passed without payment
.
2) Nulla bona return of sheriff:
Could not, after visiting the company, get enough goods to sell to settle the debts.
3) Court is satisfied that the company
cannot pay its debts: I.e proof
Dissolution and registration
After winding up and the court liquidates
-The master sends out a certificate from the CIPC- the CIPC then registers the company
Removal the name of a company from the register:
1) Transferred its registration to a foreign jurisdiction
2) Failed to file an annual return two or more years in succession and failed to provide sufficient explanation.
3) Appears to have been inactive for at least 7 years…
4) Ceased to carry on business and has no assets
5) liquidation
Types of business rescue
- Facilitating the rehabilitation of a company in financial distress
- Facilitating the best return for creditors in a company that isn’t seen as rehabilitatable
Facilitating rehabilitation:
- Temporary supervision of company and management of business affairs and property
- Temporary rehabilitation of claim to rights of the company and its property
- The development and implementation of a plan to rescue the company by restructuring its affairs, business property, debt and equity in a manner that maximises the likelihood of the company continuing in existence on a solvent basis
Voluntary business rescue:
- Submit resolution with CIPC
- Inform all interested parties
- Appoint practitioner
Requirements for supervision: - Board has reasonable grounds to believe the company is in financial distress
- Reasonable ground for saving
Financial distress:
- Reasonable unlikely that the company would be able to pay off its debts in the next 6 months
- Reasonable likelihood of the company becoming insolvent in the next 6 months
External applicant Business rescue:
Effected persons:
-Shareholder Creditor
-Registered trade union representing employees
-Employees in their personal capacity
Requirements:
1) The company is in financial distress 2) That it is otherwise fair and just
Consequences of approved business rescue:
- Moratorium on civil litigation
- May not dispose of property
- Employees protected
- Certain contracts may be suspended/cancelled
- The status of issued shares may not be changed
- Directors must work together with the practitioner
Appointment of practitioner
1) Duty to develop a business risk plan
2) Fully in charge of the affairs and replaces the board and previous management
3) Given wide powers - do whatever is necessary to manage the company’s affairs
Approval or rejection of rescue plan:
Plan must be considered at a meeting of the creditors and shareholders and a vote must be taken on this proposed plan.
Approval= Implementation
-Successful: Company goes on with their business on a solvent basis.
-Unsuccessful: Practitioner will convert the proceedings into liquidation proceedings.
Rejection:
If the plan is rejected - Company will go into liquidation
