Liquidation and Business Rescue Lawyers

Liquidations and Business Rescue Lawyers

In dire economic times, many companies are faced with making tough financial decisions.

Filing for liquidation, has generally been the path of least resistance chosen by many companies. The Companies Act 71 of 2008 (“Companies Act”), has however, introduced an alternative mechanism, namely business rescue, which may be considered by a company that is in financial distress.

In terms of the Companies Act, a company will be considered to be in ‘financial distress’, if it is not in a position to reasonably pay all of its debts as they become due and payable within the immediately ensuing six months or it appears reasonably likely that the company will become insolvent in the immediately ensuing six months. Once it has been established that a company is in financial distress, it must make a call as to whether to file for liquidation or undergo business rescue.

Both liquidation and business rescue proceedings can be launched
voluntarily or by way of an application to court by creditors and
affected parties.

Business rescue provides a moratorium on all legal proceedings and
provides a breathing space that enables the company to recover from
a position of financial distress.

Liquidation proceedings on the other hand automatically stays all civil proceedings until the appointment of a liquidator, who takes possession and realises all the assets of the business, all the proceeds of which are then
paid to the creditors of the business by way of liquidation dividends.

Business rescue results in a recovery for the business, whilst
liquidation results in the end of the business.

The objective and process of each option must be carefully evaluated, and it is important that business owners consult and have access to competent insolvency, business rescue & restructuring lawyers who can act swiftly, when called upon.

If you need more information regarding liquidations and or business rescue proceedings, contact us at info@oreillylaw.co.za