When do Directors needs to Apply for Liquidation of a Business

You are obliged to Liquidate a company that cannot pay its debt

The Companies Act states that as soon as a company cannot pay its debt, or where liabilities exceed assets, there is a duty on directors to Liquidate the company, otherwise the director can be held personally liable.

It is therefore best to Liquidate sooner rather than later.

ARE DIRECTORS UNDER OBLIGATION TO PUT THE COMPANY UNDER RESCUE, OR IS IT A CHOICE UNDER THE NEW COMPANIES ACT?

S129(7) (As amended by Sec 82 of Act 3 of 2011)

If the board of directors of a company has reasonable grounds to believe that the company is financially distressed, they must either.

• Put the company under business rescue, or.

• Deliver a written notice to all shareholders, creditors, employees, and trade unions, that the company is financially distressed, and give reasons why the company is not put under Rescue

• The new companies act’s profound influence on the liability of Members and Directors:

• The new Companies Act No. 71 of 2008 came into effect on May 1, 2011. Before the New Law came into effect, the Old Companies act placed no direct obligation on directors and members when a company / CC was in financial problems.

If the above are not met, it is a criminal offense.