What is insolvency?
Insolvency is when a company’s liabilities exceed its assets and it is not able to pay its debts when they are due.
In South Africa, it is a legal requirement that a company’s assets exceed its liabilities. If this is no longer the case in your company and it is not able to pay its debts when they are due, you have the option to liquidate or apply for business rescue. This allows the company to avoid hostile creditors and for the liquidation to be seen by the public as a company choice and not a result of being petitioned through the courts.
A company may apply for liquidation before notifying its creditors. The Board of Directors or Shareholders signs a special resolution that expresses their unequivocal consent to liquidate the company. Voluntary liquidation may be done through the CIPC or the High Courts of South Africa which will appoint a liquidator who sells the assets of the business and deposits the proceeds into an estate bank account. Greyvensteins business lawyers handle business insolvency and restructuring and advise you on practical, legal and financial advice throughout the winding-up process.
When a natural person declares bankruptcy, the courts diminish their legal capacity through the process of appointing a trustee to take control of the insolvent person’s estate. The trustee liquidates the estate, pays administrative costs and then pays the respective creditors. Sequestration separates the person from their estate and the terms of the voluntary sequestration Court Order prevent creditors from claiming any money from you. The trustee handles all the creditors according to the Insolvency laws of South Africa.
Contact Greyvensteins Incorporated if you need legal and practical advice through the voluntary sequestration process. Voluntary sequestration will give you relief from overwhelming creditor action. However, your assets remain in the insolvent estate, you cannot be a director of a company, the sequestration is listed on credit bureaus and you will not be creditworthy. You will also be excluded from professions such as estate agency and accountancy. These limitations last until your financial rehabilitation is completed.
Speak to an attorney about how you can navigate life throughout this time of diminished legal capacity. Greyvensteins Incorporated is here to assist, we have offices in Gqeberha, Cape Town and Johannesburg.
A life of limited commercial participation can be very challenging. When insolvent, everything you work for vests in the insolvent estate from which your debts are paid. It may be that all the proven creditor claims against the estate are fulfilled, however, as long as you are not legally rehabilitated, you will still operate under diminished legal capacity. Contact a lawyer Contact Gyrevensteins Incorporated in Gqeberha, Cape Town and Johannesburg to advise you whether you qualify for Insolvency Rehabilitation, how to start the process and how to protect new assets acquired after the initial sequestration.