Frequently Asked Questions

Q: What are my obligations after a Liquidation?

A: Attend a meeting with your Liquidator if possible (which we will set up). We will attend the meeting with you.

All assets must be fully disclosed to the Liquidator.

Assist the Liquidator as much as possible.

 

Q: How long does it take to finalize the Liquidation of my Company/ Close Corporation?

A:The process normally takes between six months to twenty four months.

The Administration process does not really involve you personally.

 

Q: What are the consequences of Liquidation?

A: All legal Action stops immediately!!

Any attachment by Creditors put into force against the Company / Close Corporation after the commencement of the Liquidation is void.

The Directors or Members cease to be in charge of the Company / Close Corporation, the Master of the High Court will Appoint a Liquidator whom will deal with all the matters of the Company / Close Corporation.

 

Q: How does the Liquidator get paid?

A:There is a schedule that forms part of the insolvency act which prescribes that the Liquidator is paid from the sale of the assets.

Fixed Property:

3% from the Sale of Immovable Property,

Movable Assets:

10% from the sale of movable assets,

Cash

1% of cash in the estate etc.

When a Company is Liquidated and it has no assets it costs the Liquidator a substantial amount to wind up the estate. In these circumstances we always advise our clients to pay the Liquidators fee and expenses because the Liquidator does not want to incur losses in the winding up progress. The Director of Member may be sued by the Liquidator if there is contribution payable.

 

Q: Who Appoints the Liquidator and how does he get Appointed?

A: The Liquidator is appointed by the Master of the High Court by way of Requisitions received by Creditors. The Master of the High Court could also make a discretionary Appointment

 

Q:What about Court Actions pending against my Company / Close Corporation?

A: All Legal Action stops immediately

 

Q: My Company / Close Corporation has instituted legal action against a third party – what happens after Liquidation?

A: After the Liquidation has been granted, the Liquidators can decide whether they want to take the legal action further. Remember the legal action is only suspended once the Liquidation Order has been granted.

 

Q: 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?

A: You or anyone else can negotiate with the Liquidator to buy the right from the Insolvent Estate to proceed with the legal action in your private capacity. The price of the acquisition of this right will be determined by the probability of success as well as the quantum the action. The purchase price can range from R1 to millions of Rand.

 

Q: What do I tell the Creditors or Workers of the Company or Close Corporation?

A: Request them to contact us, we will deal with them on your behalf.

 

Q: What is the position of People who work for me?

A: There Contract with the Company / Close Corporation will cease to exist immediately

What claims do employees have after the Liquidation order has been granted?

Your employees stand second in line for payment after Creditors who hold security on bonds over immovable properties. They are preferent claims and the preference of their claims is determined as follows:

Salaries or wages (for a maximum of three months) are preferent up to an amount of R12,000.

Leave pay accrued in the year of insolvency or the previous year is preferent up to an amount of R4,000.

Any payments due for any other form of paid absence for a maximum of three months prior to date of insolvency is preferent in the amount of R4,000.

Severance or retrenchment pay is Preferent up to an amount of R12,000.

Contributions payable by the insolvent Company / Close Corporation as employer in respect of any employees to any pension, provident fund, medical aid, sick pay, holiday, unemployment, training or any other similar scheme is Preferent to the amount of R12,000.

Any amounts due to the employee over and above the monies for which the employee has a Preferent claim, becomes a concurrent claim. This means that he stands in line with the Creditors which do not hold security.

 

Q: What can a Creditor do if your Company does not pay its debt?

A: It is advisable to Liquidate the Company / Close Corporation as the Creditor cannot summons you to appear in court after Liquidation.

 

Q: What is a requisition?

A: A requisition is a form, which Liquidators send to creditors requesting them to “support” his application to the Master of the High Court for his Appointment as Liquidator.

 

Q: How do I as a Creditor in a matter ensure that I receive information from the liquidator about the winding up process?

A: You send send your details to the Liquidator’s office requesting that your name be put on the mailing list of Creditors.

What is the purpose of a First & Second Meeting of  Creditor’s.

The purpose of proving creditors’ claims and to vote on important issues such as the Appointment of the Final Liquidator to provide the Liquidator with directions (i.e. whether to institute legal action) and to interrogate witnesses.

 

Q: Are there any costs involved in signing a Requisition?
A: No.

 

Q: Do I have to submit a claim after signing a Requisition?

A: No

Q: I am trading through a Close Corporation/Company, but are not making a profit? The business does not have any assets, which can be used to the benefit of the creditors. Can the Close Corporation/Company be liquidated without any assets?

A: No benefit has to be proven to creditors, when a Close Corporation or Company is liquidated.

Q: I am thinking of closing my business, but what are my responsibilities towards the rental contract of the business premises?

A: All outstanding debt, as well as any arrear rent of the Close Corporation / Company will form part of the insolvency.

Q: Do I, as Director / Member still have a liability towards the Company’s / Close Corporation’s debt, after liquidation?

A: Only if you have signed personal surety for the Close Corporation’s / Company’s debt, creditors may “call up” (summons you in your personal capacity) the obligation under the suretyship.

Q: My business has not been making any profit for several months and my creditors have “frozen” my accounts, until they receive payment on outstanding invoices. What do I do?

A: It is best to consider liquidation of the Close Corporation / Company, if there are no future prospects for your business. You can always start a new business and try again.

Q: I am the only Member of a Close Corporation / Director of a Company and I have signed personal surety for the business debt. I am married in community of property. How will it influence my spouse if creditors “call up” the suretyships and keep me liable for the outstanding debt?

A: The creditors, after obtaining a judgment against you, will be in a position to attach the assets of the communal estate.

Definition:

The liquidation of a Company / Close Corporation is a legal process whereby the Company and its affairs are placed under the control of a liquidator who must realize the assets and divide the assets amongst creditors according to the stipulations in the Companies Act. The main aim of liquidation is to divide the yield from the sale of assets amongst creditors fairly and to dissolve the Company in an orderly manner.

 

Terminology:

Q: What is the difference between “sequestration”, “bankruptcy”, “liquidation”, “insolvency” and “surrender of estate”?

A: “Sequestration”, “bankruptcy” “insolvency” and “liquidation” are all different terms, which in layman’s terms simply mean that a person or business is in such a bad financial state that creditors cannot get paid. The term “liquidation” refers to the bankruptcy of a company or close corporation and certain other legal entities. “The term “sequestration” refers to the bankruptcy of a natural person or a trust. “Surrender of estate” refers to the process where a natural person asks a court to declare him insolvent.

Q: What is a: “Trustee”, “Liquidator” and “Curator”?

A: Once a natural person is sequestrated the Master of the High Court appoints a Trustee who must take control of the assets. In case a Company, Close Corporation or certain other legal entities are liquidated, the person appointed by the Master is referred to as a Liquidator. Curator can be either someone who is appointed to be guardian of the assets of an institution like for example an Art Gallery or Museum. A Curator is also the title used for a person appointed as guardian of someone who does not have the mental capacity to look after his own financial affairs. The name Curator is many times erroneously used when referring to a Trustee or Liquidator. Contrary to popular believe, Trustees and Liquidators do have feelings and their hearts are not made of stone (medically proven fact).

Q: Who is “The Master of the High Court”?

A: The Master of the High Court is an institution which is the guardian of all insolvents, minor children and the estates of deceased persons. Guardians, trustees, Liquidators and Executors all report to the Master in the execution of their duties.

Q: What does “Debt Counselling” mean?

A: Debt Counselling is a process by which a natural person approaches a debt councilor who may assist him in re-arranging his debt payments. A company and Close Corporation don’t qualify for debt counselling. See “Sequestration” – debt counselling is discussed there.

 

Q: What does “Sequestration” mean?

A: Click the tab “Sequestration” and learn more. Sequestration does not apply to companies and Close corporations.

 

Q: What is a Secured creditor?

A: A Secured Creditor is a creditor which old security for the credit. Examples: bond over your company’s property, motorcar/asset finance etc. He stands first in line in the asset is sold.

 

Q: What is a “benefit for creditors” and how is it calculated?

A: This principle does not apply to liquidations. It applies to sequestrations. You can look up the meaning under the tab “liquidation”.

 

Q: What is a Preferent creditor?

 A: A preferent creditor is a creditor who holds security for his loans for example the creditor who has granted you a loan on your house or a hire purchase on your motor vehicle are examples of secured creditors. Apart from these creditors certain statutory creditors are preferent for example the taxman, employees, television licenses, costs owing to your doctor on your deathbed etc. The list is rather long and we will advise you on this

Q: What does the term “concurrent creditors” mean?

A: Concurrent creditors are those creditors who do not hold any security for the money you owe them. In practical and legal terms they stand at the very end of the cue when it comes to the hope or possibility of receiving anything from your Insolvent estate.

Q: What does “contribution” mean?

 A: In the winding-up of your company’s estate it might happen that, even though preferent creditors receive a dividend, there are not enough funds to cover the administrative costs of the insolvent estate. You must keep in mind that preferent creditors are only obliged to pay the cost of realization of the asset of which they hold security. They are not obliged to pay the “general administrative cost”. Should there be a shortfall in the “general administrative cost” then each creditor who has proven a claim in your insolvent estate becomes liable for the administrative cost, pro rata to the amount of this claim.

Q: I feel guilty?

 A: Please don’t tell the bank that you feel guilty. They will most probably have a service charge for that as well, do not feel guilty. If it was not your intention to incur debt intentionally and not pay your company’s creditors, you would be worthy of your guilt feelings. Feeling guilty could not change the situation.