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COMPANY LIQUIDATION - WHAT IS IT?

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TT_main | 29 April 2022 

BUSINESS LIQUIDATION - WHAT IT ENTAILS

When a company is insolvent, the term "liquidation" is used. This remedy is codified in our company law, Act 79 of 2008, as amended, and is also governed by the Insolvency Act 24 of 1936.

WHICH INSTITUTION/S MANAGES THE LIQUIDATION PROCESS?
Although the Master of the High Court sets and manages the liquidation process, there are aspects of a company's liquidation that are unique to each one. For more information, contact our consultants at our corporate headquarters.

DIFFERENT FORMS OF COMPANY LIQUIDATION

COMPANY LIQUIDATION BY WAY OF SPECIAL RESOLUTION
The concept of Voluntary Sequestration by an Individual also applies to corporations, in that the board of directors may decide to liquidate the company. 

This process is followed when the directors believe that the company is unable to meet its obligations to its creditors and that the liabilities exceed the assets.

PITFALLS TO DIRECTORS WHEN CONSIDERING COMPANY LIQUIDATION
The directors must be aware that they most likely signed personal suretyship for all credit obtained by the company. This could obviously have an impact on their personal estate. 

Another important consideration to bear in mind is the lease agreement of the premises to establish the directors' liabilities.  

Our recommendation would be to consult with an expert in this field, as the circumstances differ from company to company.

LIQUIDATION BY CREDITOR APPLICATION?
This is a process in which one of the creditors may file an application with the High Court seeking the Liquidation of the indebted company. 

This may be an expensive process, and the applicant company must ensure that they are not liquidating an empty shell, as this may be costly, and they may end up paying the contribution in the liquidated company's estate.

This is a specialised field, and it will be to your advantage, to consult with one of our debt relief consultants to assist you with the relevant information herein.  

Consultations are free, and you literally have nothing to lose and everything to gain bay communicating with us. 

WHAT EXACTLY IS CORPORATE DEBT COLLECTION THROUGH COMPANY LIQUIDATION?
Proper debtor's book management is one of the most effective ways to make a difference in a company's bottom line. In this case, for example, a comprehensive approach is required.

If the company allows for a 30-day grace period before the client is required to pay, a proper agreement must be in place, and the client company's director must sign suretyship in his personal capacity.

Other factors include purchase orders and delivery notes, in which the client company accepts delivery of the ordered goods and declares that the quantity and quality are satisfactory.

All of this is to prepare the company for simple litigation in a court of law. There are numerous other factors to consider that affect the goal of expeditious litigation that will not be addressed here.

A useful tool or remedy available to a business is debt collection via liquidation.
This is the stage at which the creditor company files an application with the court to liquidate the debtor company on the grounds that the debtor company is unable to pay for goods delivered and accepted.

DEBT COLLECTION VIA COMPANY LIQUIDATION - YES / NO?
Before embarking on this path, the applicant (creditor) company must be certain that the debtor company has equity.

If there is no equity in the debtor company, the creditor company must pay the Liquidator's administration fees.

The creditor company must be able to demonstrate that the claim against the debtor company is a liquid claim (that cannot be disputed) if the transaction has a proper paper history.

The creditor must notify the debtor of his intention to liquidate the debtor's company.

If there is no response to the notice and no responding papers to the creditor company's court application, proceed with caution because there is more than likely no equity in the debtor company; however, if the debtor company is solvent, the above method could prove to be an effective tool to control your debtors' book.

Early success in debt collection is a low-cost exercise because it only requires notification to the debtor company, of the creditors company, to effect payment.

As previously stated, various factors must be considered as part of the holistic approach, such as informing the debtor's company of your intention to liquidate it.

Will you cause a rift between your company and your client?

• Are you willing to lose the debtor's company as a client?
• What is the client's payment history?
• How much money is at stake?
• What is your company's cash flow?

If the debtor company files opposing documents to your court application, you must carefully consider whether to proceed because it can be costly.

Every case must be evaluated on its own merits. It will be difficult for a debtor company to explain why a check was returned by the bank or why it is unable to pay for the goods received.

If the debtor company files opposing papers, your legal team will be in a better position to determine whether the opposing party's argument has merit.

The above legal instrument has a high success rate and could be a quick and effective way to manage your debtor’s book.

For more information on Company Liquidation contact our office and one of our Professional Debt Consultants will assist you with information pertaining to Liquidation, its pros and cons and how you can benefit from it.

For more information, contact Cure Debt. Your Business Debt Specialist.
Find a Debt Specialist to help you find the perfect solution for your specific needs. 

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WHERE DO I FIND A DEBT SPECIALIST?
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What distinguishes CureDebt from other NCR-accredited debt relief practitioners in South Africa?
We are concerned about your well-being and the impact this process will have on you. We understand that if you decide not to continue with the process, we will lose money. 

But for us, it is not about the money. We are passionate about helping people regain their financial freedom and live a debt-free life. Let us help you START LIVING AGAIN.   

WHAT CURE DEBT OFFERS
To better serve our clients, we collaborated with a group of professionals who specialise in different fields. With over a century of experience between them, we can boldly state, "We are the best in the business of helping people and businesses. Become debt-free.'

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Debt Review | Debt Counselling | Debt Mediation & Restructuring | Cancellation of the Debt Review | Sequestration | Rehabilitation | Liquidation | Credit Clearance of Credit Score | Liquidation | Business Rescue etc.   

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Disclaimer:   This article is for informational purposes only and does not constitute legal advice. Call on CureDebt rather than relying on the information herein to make any decisions. The information is relevant to the date of publishing.
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