Corporate failure and winding up Flashcards
(14 cards)
What is business rescue
Business rescue involves temporary supervision of a company, placing it in moratorium and establishing a rescue plan.
What type of company is placed on business rescue
A company that is financially distressed
What does it mean to be financially distressed
Unlikely to be able to pay its debts in the ongoing 6 months and highly likely that the company will become insolvent in 6 months
How is business rescue initiated
By board resolution or affected party can approach courts
What are the requirements for board commencement
Company must be financially distressed, must file with the CIPC, must be reasonable prospect of rescue, liquidation can not have been initiated
What are the requirements to get a court order
Must be financially distressed, must prove company has had difficulty paying obligatory payments and there is a reasonable prospect of rescue
What qualifications are required by a business rescue practitioner
Must be licensed with the commission, must have appropriate education, has not be disqualified under s69, is independent
What are some of the formal duties of a business practitioner
Must inform shareholders of BR and practioner, must investigate prospect of rescue, must cancel void transactions and must carry out fiduciary duties
What are some grounds for the removal of a business rescue practioner
Not independent, does not satisfy s138 requirements, lacks pessary skills, is incompetent, not acting in best interest of company etc
What does a general moratorium involve
No legal proceedings can be brought against the company or its assets. there are also regulations on the disposal of companies assets
How are employees/creditors/directors impacted by BR
They continue duties as normal but under supervision of practioner and require their consent
What does insolvency mean
Unable to pay its debts within three weeks of demand or failure to satisfy a warrant of execution
How is voluntary winding up initiated
By company or its creditors, a special resolution must take place, a liquidator should be appointed, company ceases to carry on trade, powers of directors are limited
What are duties of liquidators
Recover all assets, sell assets to satisfy creditors claims, distribute balance to those legally entitled
