UNDERSTANDING THE AFTERMATH OF LIQUIDATION | HOW TO BE DEBT-FREE...

Discover the aftermath of liquidation. Learn more about the implications of liquidation, the director's responsibilities, and most importantly, ways to maintain a debt-free life after liquidation. Even if you personally signed surety for the company's debt.

What is the aftermath of liquidation? How will liquidating your business affect directors and shareholders? What will be the aftermath of liquidation, and how will we deal with labour-related debts and suretyships? Learn the truth about the aftermath of declaring your business bankrupt.

Experts will explain what will happen to labour-related debt, such as CCMA and/or labour court orders and settlements, and what kind of impact this will have on the company's directors and shareholders.

Labour-Related Debts: Definition and Explanation

An organisation's labour-related debt refers to debts resulting from labour-related disputes resolved by the South African labour court, the CCMA (Commission for Conciliation, Mediation, and Arbitration), and bargaining councils.

This typically involves an employee lodging a complaint against the employer for engaging in unprofessional, unfair, and/or unethical behaviour towards the employee. Examples of such situations include, but are not limited to, unfair dismissal, unsafe working conditions, and injuries sustained while at work.

How do you avoid labour-related debt within an organisation?
To avoid these types of problems, the company should employ a skilled labour relations consultant and/or attorney to mitigate these sensitive processes. These professionals can provide counsel and ensure compliance with the appropriate procedures while addressing labour-related matters.

The Labour Relations Policy
It is important to have a clearly defined labour relations policy implemented within the organisation and to possess the necessary understanding to implement this policy in accordance with the rules and regulations stipulated in the Labour Relations Act and/or any relevant governing body, such as bargaining councils.

Bargaining Councils
Some industries are managed by the Labour Relations Act in conjunction with the bargaining council for a specific industry.

Therefore, it is imperative for all corporations to register their employees operating in a specific industry with the industry-specific bargaining council, if applicable.  However, it is also of extreme importance that the business owners enquire as to whether it is necessary to register with a bargaining council.  In many instances, it is not necessary.

LIABILITY AND SURETYSHIP OF DIRECTORS IN LIQUIDATED COMPANIES
One significant aftermath of liquidation is suretyship, by directors in their personal capacity, for company debts. 

What types of corporate debts typically require company director(s) to sign sureties?

Loan agreements: 

Financial institutions typically include a suretyship agreement, which the company's director(s) sign to secure the loan. Should the director or directors refuse to provide personal surety, the loan application will be rejected.

Lease Agreements: 

Entering into lease agreements can be incredibly problematic. The main challenge you encounter here is that if the director who signed the lease agreement is unable to fulfil the agreement for the entire lease period, they will be personally accountable for the entire amount owed for the remaining duration of the lease agreement until it ends.  

Exercise caution when entering into lease agreements. For new businesses, I recommend signing for a shorter duration of six months or opting for a month-to-month lease, if feasible. Alternatively, you have the option to engage in a limited suretyship and/or include an early termination clause, as explained in the following section.

Further to this, we recommend that each director sign a limited surety only for any in-arrears rent, rather than a surety that covers the complete term and agreement. By taking this course of action, you will reduce your personal liability.

Early termination of a Lease Agreement
In addition, ensure that the lease agreement has a provision that grants you the ability to terminate the lease at any point, if necessary, even with the inclusion of a penalty clause imposing fees for early termination.

Overdrafts, term loans, and credit cards.
Your company bank will require the director(s) to sign a surety before granting a credit card, term loan, or overdraft facility.

When taking a deep dive into the aftermath of company liquidation, this is one of the negative attributes of declaring a business bankrupt.

Fortunately, banks are hesitant to provide smaller firms with overdrafts, term loans, and credit cards. If this happened to you, it's important to remember that it’s not the end of the world as you know it.

Several viable debt solutions exist for this dilemma, and by selecting the appropriate ones, you can become debt-free within a reasonable time frame.
What are my options as director(s) who signed surety for business debt?

1. Debt Mediation

Following liquidation, directors and creditors can engage in debt mediation. To ensure the greatest chance of success, we recommend using a qualified NCR-accredited mediator to assist you in this endeavour.

2. Debt Review
If the director(s) are struggling financially in their personal capacity but do have a steady income, the company debt where sureties were signed can be included in a debt review application if the director(s) qualify for the process and have a steady income.

3. Individual / personal sequestration – Declaring personal bankruptcy…
This solution is the most popular among the directors and shareholders of liquidated companies. The process guarantees the declaration of insolvency for the director(s) and the write-off of personal and business debts with signed sureties.

Sequestration is the quickest and most cost-effective way to rid yourself of personal debt and liabilities. Financial rehabilitation can start as soon as six months after the sequestration order is granted. Keep in mind that to qualify for this kind of rehabilitation after sequestration, you must meet certain criteria outlined in the Insolvency Act.

In conclusion:
After carefully considering the information provided, it becomes evident that the aftermath of liquidation is quite significant. Should you choose to pursue this path, it would be advantageous for you to seek the assistance of an NCR-accredited service provider with a proven track record. They can guide you through this intricate process, ensuring a successful liquidation with minimal stress.

At Cure Debts, our team of liquidation experts is here to provide you with all the information you need about business liquidation. We're happy to share our knowledge and answer any questions you may have. Looking for some guidance on how to go about liquidating your company? Reach out for some professional advice.

Expert advice:
We recommend consulting with a debt solutions expert before making any decisions about the process, as there are many potential pitfalls to be aware of. 

It's important to work with a debt solutions expert who is well-versed in all the available options under South African law. This way, you can avoid choosing insolvency when there might be a better alternative for your financial situation.

Call Cure Debt today and become one of the lucky ones. Once again, become debt-free and enjoy the benefits that come with it. Enjoying life once more.

It is important to remember that debt solution processes are complex legal processes, and if not dealt with in a professional and correct manner, they can be very stressful and frustrating. Therefore, we recommend consulting with a qualified NCR-accredited debt solution expert before proceeding with any debt solution.

Why cure debt?
Cure Debt is the ultimate debt relief solution to your unique debt problem.  With a proven track record, we are proud to say that we can help you become debt-free.