Continuing losses Liquidity ratios below 1 Overdue commonwealth and state taxes Poor relationship with Bank, including inability to borrow further funds No access to alternative finance Inability to raise further equity capital Suppliers placing company on COD, or otherwise demanding special payments before resuming supply Creditors paid outside trading terms Issuing post-dated cheques Dishonoured cheques Special arrangements with selected creditors Solicitors letters, summon
You can be charged criminally if you commit the following acts, if you have; Hidden assets or business books from your Trustee (Section 132); within 2 years before you sequestration, hidden liabilities or lied about your assets when obtaining credit (Section 133); Failed to keep proper books and records of your business (Section 134); Fraudulently preferred creditors or incurred debt without the reasonable expectation that you can pay such debt (Section 135); Neglected or ref
Liability under Tax Administration Act
On 1 October 2012, the Tax Administration Act was promulgated. Referred to the TAA for short.
Under the TAA, Directors, Members, Internal Bookkeepers, External Auditors are all liable for the companies outstanding taxes. Sars can issue civil and criminal summons in this instance.
Should you be behind on your taxes it is a serious matter and will need to be dealt with rather urgently to try and mitigate these risks.
LIABILITY OF MEMBERS AND DIRECTORS Liability under Companies Act Liability under Tax Administration Act 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 be
You have already tried the following:
1. Renegotiate Payment to Creditors
2. Refinance Debt Obligations
3. Trade out of the Problem
4. Get Investors on Board
5. Sell Shares
6. Default on Taxes
7. Downsize the Company
8. Sell-off Personal & Businesses Assets
9 Borrow from Family & Friends
Liquidation 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.
ANALYSIS: LIQUIDATION AND WINDING UP OF COMPANIES How do you wind up and liquidate a company that is factually solvent? By Norman M Mzizi
The law of insolvency is regulated mainly by the Insolvency Act 24 of 1936, which remains the main source of South African insolvency law.1 The Insolvency Act defines an insolvent as a debtor whose estate is under sequestration and includes such a debtor before the sequestration of his estate, according to the context.2 However, insolvency
1. Your company is financially distressed and is unlikely to be able to meet its commitments within the next ensuing months.
2. You need time to rationalize the affairs of your company.
3. You need relief from eminent legal action being taken by aggressive creditors of your company.
4. You need help to formalize the process of negotiating the future existence of your company with the creditors and affected parties within your company.
5. You want to save your company or C
What are the Tests for Insolvency (ie Liquidation) A company will be said to be insolvent if its liabilities either exceed its assets (factual insolvency) or if it cannot pay its debts as and when they fall due for payment (commercial insolvency). The latter is the more appropriate test (and the test used to determine the status of a company or corporation) that very often a company or corporation will be factually insolvent but not commercially insolvent.
GROUNDS FOR LIQUIDATION OF A COMPANY It is known that some creditors of companies may endeavour to do debt collection through liquidation. This seems to be more prevalent during times of increased economic pressure when cash strapped creditors seek to collect larger debts quicker. In such cases, the debtor will be served by Sheriff with an attorney’s letter demanding payment of the amount owing to the creditor within a period of three weeks, failing which an application for