WHEN YOU SHOULD GET HELP FROM INSOLVENCY LAWYERS TO LIQUIDATE YOUR BUSINESS
The single most important decision to make when your business faces financial disaster is whether to liquidate or not. Before you make the decision, get help from insolvency lawyers to determine whether your business can be rescued, whether a compromise agreement is possible with the creditors, or whether it is better to liquidate. Keep in mind that the directors or members of the business cannot be held responsible for the debt of the business if they liquidate the business when its liabilities exceed its assets.
Procrastinating adds more pressure and if you wait too long before making the decision, you might end up being held accountable for the additional debt that has been incurred. The law also states that, if the directors or members have signed surety for the company, they also become personally responsible for the company’s debt. Get help from insolvency lawyers regarding this matter, as you will also need to sequestrate if you signed surety, unless you can pay the company’s debt.
Liquidation is an option if your firm owes SARS taxes as well, since the taxes form part of the liquidation process. This is, however, not the case if the company owes custom taxes, as these cannot form part of the liquidation. Get help from insolvency lawyers on how to proceed with liquidation if your firm owes tax money, as SARS is a preferent creditor. This means SARS gets money before other creditors’ claims are settled. If your business still owes money to SARS after the winding-up process, the directors can be held accountable for the balance.
The decision to liquidate the business may feel like a decision to fail, but the truth is that you are acting responsibly. If you wait too long, the creditors may regard it as reckless trading. You owe it to your business, the creditors, and your employees to make the responsible choice. Liquidation does not have to be the end of the business. Indeed, if you plan and take the necessary steps to set up a new business in time to ensure on-going trading, you can save the jobs of your employees.
Get help from insolvency lawyers, as you will need to register another business and proceed trading from it the moment before you announce the last trading day of the business to be liquidated. In this way, the employees can work for the new company while the insolvent business is liquidated. The decision must be made early on and you need to stop all payments to creditors on the last day of trading. Do not trade from the insolvent business at all after the date, since all the income will be for the benefit of the creditors, leaving you without money to trade in the new business and to keep paying salaries.
Do not let your business’s debt spiral out of control. Once the liabilities exceed the assets, you are by law required to take action. Get help from insolvency lawyers before creditors take judgment against your business.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. You are advised to consult with us before using/relying on this information. Information is relevant to the date of publishing – February 2018.