Business Debt Relief Remedies

There are several different Business Debt Relief Remedies available to Businesses experiencing Financial Difficulties, namely:

1. Business Debt Restructuring
2. Business Rescue
3. Liquidation

1. BUSINESS DEBT RESTRUCTURING AND WHAT IT ENTAILS

Debt Restructuring is an unofficial process that is followed to negotiate payment arrangements with creditors.

This process is not regulated by specific South African Law, however if the parties reach an agreement, it’s binding but both parties must reach consensus for such an agreement to be binding.

The success of this process is reliant on several factors, for instance:

• Are these accounts In Arrears?
• Have there been previous arrangements that have been adhered to or not?

It is not advisable to do these negotiations yourself, but rather appoint a Business Debt Relief Specialist to assist you with the negotiation of these terms.

2. LIQUIDATION AND WHAT IT ENTAILS

Terminology:

Liquidation, Insolvent Business, Bankrupt Business, and Winding Up of Insolvent Company to name a few.  However the Legal terminology includes Winding Up Order and Liquidation.

What is Liquidation?

Liquidation is a process that is followed when a Business is Insolvent. The remedy is entrenched in South African Company Law, the Companies Act 71 of 2008 as amended and South Africa’s Insolvency Act, Act 24 of 1936.

The Liquidation Process is managed by the Master of the High Court. Although the process is set and managed by the Master of the High Court, there’s certain aspects of the Liquidation Process that are unique to each business.

What happens to Assets and Liabilities in the Liquidated Company?

The Liquidator will deal with the Assets and Liabilities of the Liquidated company in accordance with the rules and regulations stipulated in the Insolvency Act together with the Companies Act.

What happens to the Directors of the Liquidated Company?

If the Directors of the Liquidated Company signed surety in their personal capacity for any debt owed to the company, they will be liable for these debts in their personal capacity, because they signed surety in their personal capacity for these debts.

3. BUSINESS RESCUE AND WHAT IT ENTAILS

Terminology:

Business Rescue.

What is Business Rescue?

When a Company is in Financial Distress, it has the remedy to implement a Business Rescue Plan to try to avoid Liquidating the Business. Such a plan must be compiled by a recognized Business Rescue Practitioner.

The Court may be approached to assist the Company by limiting litigation against the company whilst the company is Under Business Rescue, however this is an expensive process, because the Business Practitioner’s involvement is quite extensive and therefore very expensive.

This remedy is normally too expensive for a small business.