STUDY UNIT 12

Question 1

Define winding up of companies

Answer 1

procedure by which a company’s assets are sold, debts are paid and the remaining amount is paid to the shareholders of their rights

Question 2

Modes and alternatives for winding up

Answer 2

1) compulsory winding up
2) voluntary winding up
- on application voluntary may be converted to compulsory
- alternative = business rescue

Question 3

Discuss business resuce

Answer 3

• reasonable prospect of being rescued
• court van make order for winding up of company or for the enforcement of security
• application suspends liquidation

Question 4

What happens when a court dismisses business rescue

Answer 4

winding up of company

Question 5

Discuss winding up by court (compulsory)

Answer 5

1) jurisdiction of court
2) when companies can be wound up
3) parties to apply for insolvent companies
4) parties to apply for solvent companies
5) steps prior to application
6) powers of court

Question 6

When can a company be wound up?

Answer 6

1) special resolution
2) failure to commence/continue with business
3) loss of capital
4) inability to pay debt
5) dissolution of external company
6) just and equitable
7) conversion of voluntary to compulsory
8) no reasonable prospect of business rescue succeeding
9) termination of business rescue
10) dead-lock in management/voting
11) fraud/illegality/misapplication of company assets
12) failure to comply with compliance notice

Question 7

Who may apply for insolvent companies?

Answer 7

• the company
• one/more creditors
• one/more members
• any/all of the above parties
• the master
• a provisional/ final judicial manager

Question 8

Parties to apply for solvent companies?

Answer 8

1) special resolution - the company itself
2) just and equitable - the company, one/more creditors
3) conversion of voluntary to compulsory - the company
4)no reasonable prospect of business rescue succeeding - appointed practitioner
5)termination of business rescue - one or more creditors
6) deadlock in voting - the company, one or more creditors
7) fraud, illegality or misplacement of assets - any shareholder with leave of the court
8) failure to comply with compliance notice - the CIPC or Take over regulation panel

Question 9

Steps prior to application

Answer 9

1) security for costs
2) master’s report
3) notification of interested parties

Question 10

Discuss Voluntary winding up

Answer 10

• special resolution that exists out of winding up by members and winding up by creditors

Question 11

Members and company voluntary winding up

Answer 11

• before process can proceed: security must be furnished to satisfaction of Master and the Master must dispose such security
• reasons to be resorted to : purpose of company is fulfilled and the members are no longer on amical terms

Question 12

Creditors voluntary winding up

Answer 12

• may be resorted to when company is unable to pay debts
• solvent OR insolvent companies

Question 13

Consequences of winding up

Answer 13

• commencement of winding up
• directors divested of power and control
• unauthorised dispositions void
• stay of proceedings
• notice of winding up
• lodging of statement of affairs with Master

Question 14

Meetings and proof of claims in winding up

Answer 14

• creditor’s meetings
• member’s meetings
• proof of claims