Ellies Electronics continues to trade as it seeks knight in shining armour

Jan

Jan

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Ellies Holdings is dead, long live Ellies Electronics

Ellies business rescue practitioner John Evans has clarified that the company’s main operating subsidiary Ellies Electronics will continue to trade.

This follows a notice published late on Wednesday afternoon to the JSE news service stating that Ellies Holdings could not be rescued and would be liquidated.
 
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Where the accountants at, come explain?

Ellies electronic makes the money, but ellies holdings is bankrupt, how does the subsidiary continue to trade? Are they still a going concern?
 
rh1 said:
Where the accountants at, come explain?

Ellies electronic makes the money, but ellies holdings is bankrupt, how does the subsidiary continue to trade? Are they still a going concern?
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The holding company owns shares in the subsidiary. Their financial position does not affect the financial position of the subsidiary. Think of it like this, if you own shares in Tesla, and you go personally bankrupt, that doesn't mean that Tesla goes bankrupt.
 
deweyzeph said:
The holding company owns shares in the subsidiary. Their financial position does not affect the financial position of the subsidiary. Think of it like this, if you own shares in Tesla, and you go personally bankrupt, that doesn't mean that Tesla goes bankrupt.
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How does the parent company go bankrupt if their subsidiaries are making money? Or is it a case of only some subsidiaries are making money and other subsidiaries have drained the parent of all resources and they’re not willing to save the failures by putting the successes at risk? Or is this just creative accounting
 
stevenv said:
How does the parent company go bankrupt if their subsidiaries are making money? Or is it a case of only some subsidiaries are making money and other subsidiaries have drained the parent of all resources and they’re not willing to save the failures by putting the successes at risk? Or is this just creative accounting
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I don't know the exact specifics of why the holding company went bankrupt, but typically a company becomes insolvent and liable for liquidation when its liabilities exceeds its assets and it can no longer service its debt because its run out of cold hard cash. So the holding company might very well have substantial assets with regards to the shares it owns in various subsidiaries, but these are just "paper" assets, unrealised and illiquid until they are actually sold.

Just because a holding company owns shares in a subsidiary doesn't mean that money automatically flows upwards from the subsidiary to the holding company. Typically the holding company would extract profits from their subsidiaries through dividend payments or the charging of "management fees" to shift profit upwards from the subsidiary to the holding company. For whatever reason the subsidiaries might have decided that they're not willing to push more cash to the holding company, or the holding company doesn't have enough voting rights to force the subsidiaries to declare a dividend. There could be any number of reasons and machinations at play. But the important thing to realise is that the subsidiary and the holding company are distinct legal entities, one of whom just happens to own shares in the other. That doesn't necessarily create an obligation for the subsidiary to rescue the holding company if it gets into financial trouble.

There is one scenario where the liquidation of a holding company could adversely affect a subsidiary, and that is if the holding company has lent a lot of money to the subsidiary in the form of a shareholders loan. When the holding company is wound up by the liquidators they might very well call in the loan and force the subsidiary to pay it back. If the subsidiary can't afford to pay back the loan it might then in turn force the subsidiary into insolvency and liquidation.
 
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rh1 said:
Where the accountants at, come explain?

Ellies electronic makes the money, but ellies holdings is bankrupt, how does the subsidiary continue to trade? Are they still a going concern?
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No they're not. But adding a holding company just adds extra overhead especially with the insane fees the JSE charges.

deweyzeph said:
The holding company owns shares in the subsidiary. Their financial position does not affect the financial position of the subsidiary. Think of it like this, if you own shares in Tesla, and you go personally bankrupt, that doesn't mean that Tesla goes bankrupt.
Click to expand...
It does if your sole financial position is Tesla.

deweyzeph said:
There is one scenario where the liquidation of a holding company could adversely affect a subsidiary, and that is if the holding company has lent a lot of money to the subsidiary in the form of a shareholders loan. When the holding company is wound up by the liquidators they might very well call in the loan and force the subsidiary to pay it back. If the subsidiary can't afford to pay back the loan it might then in turn force the subsidiary into insolvency and liquidation.
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That is only applicable insofar as the loan is payable. You can't call on creditors to pay you back outside of the loan instalments because you're having trouble with cashflow. So typically if the subsidiary is currently able to pay it will continue to pay.
 
Gravedigger said:
So, all Ellies related electronics will continue to be produced and sold? For example, the Ellies TVSafe or FridgeSafe?
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Most of it is just rebranded like their flootlights that have the exact same Fivestar design.
 
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