Questions and Answers on Business Rescue and Winding-up of Companies and Close Corporations and the BR Practitioner

Practical answers and explanations to a selection of over 600 questions on Business Rescue and Winding-up of Companies, including questions and answers on the Business Rescue Plan, the Business Rescue Practitioner and the Liquidator including Selected Case Law!

SOME SELECTED QUESTIONS FROM THE BOOK

BUSINESS RESCUE, BUSINESS RESCUE PLAN AND THE BUSINESS RESCUE PRACTITIONER: A selection of questions answered

1. What are the main differences between Companies Act 1973 and Companies Act 2008 in regards to business rescue and winding-up?
2. What is the difference between judicial management and business rescue?
3. What is the purpose of business rescue?
4. Why should a company consider business rescue over liquidation?
5. What is the test and condition whether a company  qualifies for business rescue?
6. What is the responsibility of the board in deciding whether the company should be placed under business rescue?
7. How is a company placed in business rescue?
8. When does a company not qualify for business rescue?
9. When is a company  financially distressed?
10. What are possible solutions to deal with the symptoms of financial distress?
11. What are the three stages in a business rescue process?
12. Who is the business rescue practitioner of a company?
13. What form does the Business Rescue Plan take?
14. What is the solvency and liquidity test as it applies to business rescue?
15. What is “post-commencement finance”?
16. What is the ranking of claims in respect of post-commencement finance?
17. Into which three groups are companies classified for the purpose of business rescue proceedings?
18. What is the effect of business rescue on employees and contracts?
19. What is the effect of business rescue on creditors?
20. What are the two ways of initiating business rescue proceedings for a company ?
21. When may the Commission issue a business rescue practitioner’s licence to an applicant?
22. Which steps must be taken to apply for a licence to practise as a business rescue practitioner?
23. What are the mandatory provisions relating to the qualifications of business rescue practitioners?
24. In which three ways may a business rescue practitioner be appointed?
25. May a business rescue practitioner remove a shareholder of a company  during business rescue proceedings?
26. May a business rescue practitioner delegate any function to a person who has been part of the pre-existing management of a company n?
27. What powers does the business rescue practitioner have?
28. May a business rescue practitioner of a company who has acted as the practitioner of that corporation during its business rescue proceedings be appointed as the liquidator of that corporation?
29. What is the time period in which the notice of appointment of a business rescue practitioner for a company  must be filed with the Commission?
30. Who may apply to court for a business rescue order?
31. What are the specific steps and procedures to implement the business rescue process for a company ?
32. Can an application for business rescue be made after the application for liquidation has already commenced?
33. On what grounds can the court be asked to set aside a business rescue order?
34. When does business rescue proceedings commence?
35. Which notices must be issued by a business rescue practitioner in the event that the business rescue proceedings concludes that there is no reasonable prospect for a company to be rescued?
36. What is the most important consequence of the commencement of business rescue proceedings?
37. What are the seven statutory requirements which must be met before a company  in business rescue proceedings may dispose of its properties?
38. May a company dispose of any of its properties during business rescue proceedings?
39. What is the effect of business rescue proceedings on contracts of the company?
40. Companies Act 2008 requires the shareholders of a company to provide the business rescue practitioner of the corporation with a statement of affairs of the corporation. What particulars must be contained in this statement of affairs?
41. Under what circumstances does an employee of a company become a preferred unsecured creditor of a corporation?
42. What are the ten rights of employees of a company which are undergoing business rescue proceedings?
43. Are the creditors of a company which has been placed under business rescue proceedings, entitled to form a creditors’ committee?
44. What are the nine rights of creditors of a company which has been placed under business rescue?
45. What are the rights of the shareholders of a company which has commenced business rescue proceedings?
46. May a business rescue practitioner remove from office any shareholder of a company during business rescue proceedings?
47. May an employee oppose a creditors’ resolution to commence business rescue proceedings?
48. What is the minimum information that a business rescue practitioner must present in the business rescue plan?
49. A proposed Business Rescue Plan must conclude with a certificate. What information must be contained in the Business Rescue Plan certificate?
50. What are the five statutory items on the agenda of the second creditors meeting?
51. What are the two statutory requirements which must be met before a preliminary Business Rescue Plan may be approved?
52. Is a Business Rescue Plan binding on a shareholder of a company even if he has voted against that Plan?
53. Is a Business Rescue Plan binding On a creditor of a company in the event that he has not proven his claim against the corporation?
54. Is a creditor entitled to enforce a debt owed to him by the company before the commencement of business rescue proceedings?
55. Does Companies Act 2008 provide for the automatic cessation of business rescue proceedings?
56. Is it possible for a company to enter into a compromise with any of its creditors without going into liquidation?
57. Does a compromise still require a court application to commence the procedure?
58. What is the percentage threshold of votes that is required for a proposal for a compromise to be adopted?
59. Does a compromise affect the liability of a person who is a surety of the company?
60. What are the differences between an informal turnaround, a compromise and a composition?
61. What is the duty of the business rescue practitioner where there is evidence of any voidable transaction or fraud in the dealings of a company?
62. In which instances must a business rescue practitioner file a notice of termination of the business rescue proceedings of a company?
63. May a business rescue practitioner propose an agreement with a company for remuneration in addition to the remuneration in accordance with the prescribed tariffs?
64. What are the grounds for the removal of a business rescue practitioner?
65. May an employee of a company oppose the appointment of a business rescue practitioner?
66. How and who can object to business rescue?
67.  

WINDING-UP OF SOLVENT COMPANIES AND CCs: A selection of questions answered

1. What does the winding-up or liquidation of a company imply?
2. Which are the two procedures by which a solvent company may be dissolved?
3. Is a company permitted to carry on its business during the liquidation process?
4. When may the Commission apply to a court for an order to wind-up a solvent company?
5. Is a court allowed to refuse to grant a winding-up order of a solvent company where the assets of the corporation have been mortgaged to an amount equal to those assets of the corporation?
6. May a court stay or set aside the winding-up of a solvent company?
7. Which documents must be filed with the Commission where the shareholders of a solvent company has passed a shareholders’ special resolution for the winding-up of the corporation?
8. Which documents must be lodged with the Master where the shareholders of a solvent company has passed a shareholders’ special resolution for the winding-up of the corporation and they have passed a resolution nominating a person as liquidator?
9. Which form must be used for a statement of affairs of a solvent company and what information must this statement disclose?
10. May a creditor of a company who is being wound-up by court apply for an order to inspect the accounting records of that corporation?
11. When may a court order a banker of a solvent company to transfer any records pertaining to the liquidator of the corporation?
12. May a court order that a shareholder of a solvent company from whom money is due to his corporation, to pay same into a banking institution who is named by the court instead of to the liquidator indirectly?
13. Which persons are allowed access to the statement of affairs of a solvent company?
14. In a winding-up of a solvent company by court order, does a shareholder of that corporation have a voting right in respect of the nomination of a liquidator of the corporation on the grounds of his loan account with the corporation?
15. What are the differences between: 1) a general meeting of creditors; 2) a creditors’ meeting and 3) a shareholders’ meeting?
16. May the voting rights of shareholders of a company in winding-up be taken into consideration by a court?
17. Who appoints a person to act as the chairman at a creditors meeting – the Master or the liquidator?
18. Is there a duty on a shareholder of an insolvent company in winding-up, to attend the meetings of the creditors of the corporation?
19. Under what circumstances may the Master subpoena a person to attend a meeting of creditors of a company?
20. What are the main differences between creditors and shareholders meetings of a company in winding-up?
21. What are the differences in the application of the liability test for reckless conduct of the business of a company?
22. Which steps must be implemented to apply for the voluntary liquidation or winding-up of a solvent company?
23. Which steps must be implemented to apply for the liquidation or winding-up by order of a court?

WINDING-UP OF INSOLVENT COMPANIES AND CCs: A selection of questions answered

1. How do the liabilities of shareholders of a company differ from the liabilities of directors and prescribed officers of a company, in the winding-up of a company and company, respectively?
2. Which steps must be implemented to apply for the voluntary winding-up of an insolvent company?
3. Which forms must be lodged with the Commission in the event of the winding-up of an insolvent company?
4. Is it necessary to prove actual insolvency when applying for a winding-up order of a company on the grounds that the corporation is unable to pay its debts?
5. Who may interrogate a shareholder of a company which is being wound up and is unable to pay its debts?
6. May a shareholder of a company who is called to give evidence under section 415 of Companies Act 1973 be represented by an attorney with counsel?
7. May a shareholder of a company in winding-up refuse to answer a question under interrogation?
8. Under what circumstances may a court summon a shareholder of a company?
9. If the Master requires a shareholder of an insolvent company to produce a record if the corporation is under his control, is there a prejudice to any lien claimed in regards to that document? 
10. Who is responsible for the payment of the costs of any interrogation of a shareholder of an insolvent corporation under sections 417 or 418 or Companies Act 1973?
11. May a shareholder of an insolvent company refuse to answer any question put to him under section 418 of Companies Act 1973 interrogation?
12. Under what circumstances may a court hold a shareholder of a company personally liable and order him to pay compensation to the corporation?
13. When is a shareholder of an insolvent company deemed to have made a disposition of the assets of that corporation?
14. Does section 424 of Companies Act 1973 impose a personal liability or a criminal liability on a shareholder of a corporation for the reckless conduct of a corporation?
15. Under what circumstances shall a shareholder of an insolvent company be liable for debts contracted by the shareholder?
16. Is a shareholder of an insolvent company guilty of an offence if he has contracted a debt without reasonable expectation of being able to discharge such debt?
17. What is the duty of a shareholder of an insolvent company if that shareholder alienates any property of the corporation which is not in the ordinary course of business?
18. Is it an offence if a shareholder of a company disguised any losses of the corporation?
19. Is a shareholder of an insolvent company guilty of an offence if the corporation has not kept proper records of any transactions?
20. Is a shareholder of an insolvent company guilty of an offence if he fails to disclose to creditors what has become of any property recently in his possession?
21. Is it an offence if a shareholder of an insolvent company accepts a benefit as a consideration for having to refrain from disclosing any information in regard to that insolvent corporation?
22. What is the sanction if a shareholder of an insolvent corporation has any property of the corporation in his possession who has knowledge of the winding-up of the corporation and still retains that property?
23. What is the sanction in the event that a secured creditor of an insolvent corporation fails to pay over the net proceeds of the realisation to the liquidator of the corporation?
24. What are the similarities in regard to Companies Act 2008, Companies Act 1973 and Companies Act, 1984 relating to the reckless and fraudulent carrying-on of the business of a company by the shareholders of that corporation?
25. On what grounds may a shareholder of a company which is in the process of being wound-up, be criminally held liable?
26. Who may make an application for the winding-up of a company?
27. May a court refuse to make a winding-up order if that company has no assets?
28. What happens to the claims of creditors in the winding-up of a company?
29. What are the modes of winding-up of a company?
30. Under what circumstances is a company deemed to be unable to pay its debts?
31. May a shareholder of a company who is unable to pay its debts and is being wound-up by a court or by creditors' voluntarily winding-up, inspect any books of that corporation?
32. May a court set aside the proceedings of a voluntary winding-up?
33. What is the effect of a voluntary winding-up on the status of the company’s shareholders?
34. What which stage is the winding-up of a company deemed to commence?
35. What which stage shall the voluntary winding-up of a company officially commence?
36. What are the circumstances under which a company may be wound-up voluntarily?
37. What is the purpose of the first meeting of creditors and shareholders of a company that is being wound-up?
38. May a company which is in the process of being wound-up, enter into an arrangement?
39. Who may apply to a court to make an order declaring a dissolution to be void?
40. May a shareholder of a company which is being wound-up and unable to pay its debts, who has been summoned before the Master or a court, refuse to answer any questions put to him at the examination?
41. May a past shareholder be personally held liable to restore property of a company?
42. May a court set aside the proceedings of a voluntary winding-up of a company?
43. What is the effect of the removal of a company name from the Commission's register?
44. What is the mandatory notice on documents required in respect of applications for the liquidation of either solvent or insolvent companies?
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THE LIQUIDATOR: A selection of questions answered

1. What are the current statistics of liquidations and insolvencies in South Africa?
2. May a business rescue practitioner be appointed as a liquidator?
3. May a liquidator be appointed as a business rescue practitioner?
4. What are the powers of a liquidator in the winding-up of a company?
5. What are the new duties of the liquidator of a company in winding-up when it appears to him that any business of a corporation was being carried on recklessly?
6. What are the new duties of the liquidator of a company if it appears in the course of the winding-up of the corporation that the shareholders of the corporation have been guilty of an offence for which the shareholders may be criminally liable under Companies Act 2008, in terms of the reckless and fraudulent carrying-on of the business of the corporation?
7. May the liquidator of a solvent company exercise the powers given by Companies Act 2008 without any specific order or sanction of a court?
8. Which persons are disqualified from being appointed as the liquidator of a company?
9. Which persons may be disqualified by a court from being appointed as a liquidator of a company?
10. What are the five reasons for a Master to decline to appoint a nominated person as a liquidator who has been nominated as such in a meeting by creditors and shareholders?
11. May a liquidator apply for a reduction in the security given by him?
12. For what period and where must the liquidator's account lie open for inspection?
13. Who must be appointed as the liquidator if the person nominated in a shareholders' special resolution differs from the person nominated by the creditors in a creditors' meeting?
14. In the case of a shareholders' voluntary winding-up of their company, who determines the liquidator's remuneration?
15. What are the duties of the Master in connection with a complaint received by a creditor of the company in regards to the conduct of the liquidator of that corporation?
16. On what grounds may a Master remove a liquidator of a company?
17. Who appoints the liquidator of a company - a court or the shareholders of the corporation?
18. Who nominates a liquidator in the event of a shareholders' voluntary winding-up of a company - a court or the Master?
19. What are the five reasons for a Master to decline to appoint a nominated person as a liquidator who has been nominated as such in a meeting by creditors and shareholders?
20. What is the remedy a shareholder of a company who is aggrieved in the refusal of the Master to accept his nomination of a person as the liquidator of his corporation?
21. Which persons are disqualified from being appointed as the liquidator of a company?
22. Under which circumstances may a court declare a liquidator incapable for life from holding office as the liquidator of a company?
23. What are the duties of the Master in the event that a vacancy occurs in the office of the liquidator of a company?
24. Under what circumstances may a Master remove a liquidator of a company from office as opposed to a court?
25. Does the Master have the authority to investigate any books or vouchers of a liquidator?
26. In the event that two or more liquidators have been appointed by a company, are they individually or jointly and severally liable for acts performed by them in the winding-up of a corporation?
27. Under which circumstances may a liquidator of a company apply for a reduction in the security that he must give?
28. Is a liquidator entitled to receive remuneration for his services as liquidator out of the assets of the company?
29. What is the difference in the general powers of a liquidator as opposed to the specified powers?
30. What are the four requirements which must be met before an arrangement entered into between a company and its creditors are binding on that corporation?
31. May the liquidator of a company terminate a lease in terms of which a company is the lessee of movable property?
32. What is the purpose of the first meetings of creditors and shareholders of a company?
33. Is it a statutory requirements that resolutions of creditors be recorded in the minutes of a creditors' meeting?
34. May creditors of a company direct the liquidator not to employ a particular attorney in connection with the administration of that corporation?
35. What are the reasons a liquidator may examine the affairs and transactions of a company before its winding-up?
36. Where must the liquidation and distribution account of the liquidator of a company lie open for inspection?
37. Is the Master under a duty to lodge a copy of the liquidation and distribution account of a liquidator of a company with a Magistrate?
38. Does the confirmation of the Master of the liquidation and distribution account of a liquidator of a company have the effect of a final judgment?
39. How soon after the confirmation of the liquidation and distribution account must the liquidator of a company distribution the assets of that corporation?
40. May a liquidator of a company unable to pay its debts, direct the Master for an order that current and former shareholders make a repayment of their remuneration received, to the corporation?
41. What are the circumstances which a company is deemed unable to pay its debts?
42. On which grounds may the application for the setting aside of the liquidation of a corporation be opposed by a creditor in terms of an offer of composition?
43. What are the three statutory provisions for an offer of composition to be binding between a company and its creditors?
44. Does the liquidator of a company have the power to determine whether an application to a court in relation with reckless and fraudulent carrying-on of the business of the corporation, is advisable?
45. What are the statutory duties of a liquidator in regards to the liability of shareholders to a creditor of the company?

PLUS SELECTED CASE LAW

PLUS Chapters II and VI from the Integrated and Consolidated Companies Act, 71 of 2008, Chapter XIV of Companies Act, 61 of 1973, and Part IX from the Integrated and Consolidated Close Corporations Act, 69 of 1984