Some of the questions you may have regarding liquidation are briefly answered below. We recommend making an appointment with our attorney and consultant team to discuss each of the issues in-depth.
WHAT HAPPENS TO MY COMPANY’S OVERSEAS ASSETS?
The off-shore assets form part of the liquidation account and the liquidator has the power to decide what to do with the assets. The liquidator or appointed trustee can apply to a court in the relevant country to have the assets included in your company’s insolvent estate.
WHAT ABOUT THE COMPANY’S CREDITORS IN OTHER COUNTRIES?
The overseas creditors must also be notified about the intention to liquidate the company and they have the same rights as creditors located in South Africa to claim against the insolvent estate.
HOW DOES THE APPOINTED TRUSTEE OR LIQUIDATOR GET PAID FOR THEIR SERVICES?
The liquidator gets a percentage of the sale of the company’s assets including cash reserves and movable and immovable property. If the company does not have any assets, the directors normally have to pay for the liquidator’s fees.
FOR HOW LONG DO THE COMPANY OWNERS STILL HAVE USE OF THE COMPANY VEHICLES?
Usage of the vehicles is normally permitted until shortly after the company’s liquidation. However, creditors such as the vehicle finance companies can approach the court to apply for immediate removal of the vehicles for safe keeping until the liquidation process has been completed.
HOW LONG DOES THE APPLICATION FOR LIQUIDATION TAKE?
The process normally takes around four to six weeks for the granting of the provisional order and another three weeks before the final order is granted. However, following the correct procedures is essential and creditors can oppose the application, which can lead to delays in the granting of the final order. We suggest getting liquidation help the moment you realise that the company is in deep financial trouble. Note that the winding-up process can take from a few months to years, depending whether there have been legal actions against debtors, but you will not be personally involved in the process.
CAN I AS A COMPANY OWNER BE JAILED FOR NOT PAYING CREDITORS?
No, you cannot go to jail for not paying debt in South Africa, but when it comes to debt owed to SARS, certain conditions apply. We recommend speaking to a tax attorney and getting professional liquidation help in this matter rather than leaving it until one of the creditors initialise legal steps against the company.
SHOULD THE COMPANY STILL PAY THE ELECTRICITY BILL IF WE HAVE APPLIED FOR LIQUIDATION?
Yes, since in all likelihood the electricity will be cut off if not paid.
CAN I AS DIRECTOR BE HELD ACCOUNTABLE FOR THE COMPANY’S DEBT?
Only if you have signed surety for any of the debt and only if you have been found guilty of fraudulent actions or gross negligence, which caused the company’s financial failure.
WHAT IS THE ROLE OF THE LIQUIDATOR?
The liquidator is appointed by the court to handle the winding-up process during liquidation. The liquidator must sell the assets and divide the revenue of sale amongst the creditors in a fair manner.
HOW IS THE ORDER OF THE CREDITORS DETERMINED?
Creditors who hold security are preferred creditors and their claims thus receive preference. SARS is next in line as a preferred creditor after the above-mentioned creditors, in addition to any employees who have claims against the company’s estate.
WHO IS THE MASTER OF THE HIGH COURT?
It is the institution that oversees and governs matters related to insolvent parties and estates, minors, and deceased estates. The Master of the High Court appoints the executors, liquidators, or trustees.
WHEN SHOULD WE STOP PAYING CREDITORS?
Once the decision to liquidate has been made, you should stop all payments to creditors as one creditor may not benefit more than the others.
WHAT HAPPENS TO A LEASE AGREEMENT WHEN THE COMPANY APPLIES FOR LIQUIDATION?
You will need liquidation help from the trustee or liquidator to have the lease terminated immediately. If the liquidator does not notify the landlord within three months, it will automatically terminate.
WHAT NEXT?
Make sure you understand the process and get answers to any of your questions. Make use of our professional services if you need liquidation help.