When To Liquidate a Business
When To Liquidate a Business.
In terms of the New Companies Act
ARE DIRECTORS UNDER OBLIGATION TO PUT THE COMPANY UNDER RESCUE, OR IS IT A CHOICE UNDER THE NEW COMPANIES ACT!
S129(7) (As amended by Sec 82 of Act 3 of 2011)
If the board of directors of a company has reasonable grounds to believe that the company is financially distressed, they must either;
Put the company under business rescue, or;
Deliver a written notice to all shareholders, creditors, employees and trade unions, that the company is financially distressed, and give reasons why the company is not put under Rescue
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.
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.
ONCE THE PTY/CC HAS BEEN PLACED INTO LIQUIDATION SARS MAY NOT PROCEES WITH ANY LEGAL OR CRIMINAL ACTION
Please note that SARS can proceed with Criminal Proceedings:
In terms of either section 91 of the Income Tax Act and/or section 40 of the Value-Added Tax Act and/or section 14 of the Unemployment Insurance Fund Act and/or section 13 of the Skills Development Levy Act you are hereby notified that should you fail to make full payment within 10 business days from the date of this notice, a statement will be filed with the relevant clerk of the Magistrates’ Court or the registrar of the High Court, upon which a civil judgment for a liquid debt will be entered against you in SARS’ favour for the above amount together with interest. A warrant/writ of execution may then be issued to attach and sell your assets.
In addition, you are hereby informed that SARS may without notice appoint an agent, as described in the provisions of section 99 of the Income Tax Act and/or section 47 of the Value-Added Tax Act and/or section 14 of the Unemployment Insurance Fund Act and/or section 13 of the Skills Development Levy Act, to pay the outstanding amount on your behalf.
Furthermore, the submission of either Value-Added Tax and/or PAYE returns without payment constitutes a criminal offence in terms of either section 58(d) of the Value-Added Tax Act and/or paragraph 30(a) of the Fourth Schedule to the Income Tax Act. SARS reserves the right to institute criminal proceedings in this regard.
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.
Please consult with us to find out what legal recourses are to your disposal.