Liquidation
Based on the answers you have given, it seems your business may be severely at risk to the point it is unlikely to continue operations. Given this, you might want to consider entering Liquidation Proceedings as defined in the Companies Act, in order to pay out creditors (incl. investors) and allow for an orderly wind-down of business activity.
The purpose of liquidation is to realise all the assets of the business. All the proceeds are then paid to the creditors by way of liquidation dividends.
How to decide if you need to liquidate your business
- Liabilities clearly exceed assets and there appears to be no prospect of the company paying its immediate debts as they become due.
How the process works
Can be launched voluntarily or by way of an application to court by creditors or affected parties
- Voluntary liquidation: requires that a company's shareholders must adopt a special resolution (i.e. supported by 75% of voting rights exercised in the resolution) which will indicate that they agree to the winding-down of the company
- Involuntary liquidation: may be initiated by creditors or affected parties, where affected parties include: a business rescue practitioner in the event that there is no reasonable prospect of the company being rescued, creditors, the company (including directors and shareholders) in the event that it is equitable and just for the company to be wound down (and the directors are in a deadlock which the shareholders cannot break)
Further details on the process to follow are laid out in the Companies Act
What this means for your business
- Creditors come together and the debtor's estate (i.e. business assets) is frozen
- All property is placed in control of the Master of the High Court until a liquidator is appointed
- Directors cease to be in charge of the company
- A stay of all civil proceedings
- Many commercial transactions (i.e. transfer of shares, sale of property, execution of judgments, etc.) after commencement of proceedings may be declared to be void
Helpful contacts
- Please contact your Relationship Manager at your bank
