Threat of summons

[muisnes]

Summons > court > judgment > sherif arrives attach property > potential business liquidation.

Actually there is no need to go to court unless the defendant files a Notice of intention to defend with the claimant's attorney and the clerk of the court (for which it is best to use a lawyer).

If no notice of intention to defend is filed within 14 days of summons being served, a default judgment can be issued by the clerk of the court without the case being heard by a magistrate. Usually a Warrant of execution of moveable property is issued with the judgment. The Sheriff will then use the warrant to attach any goods he can find for sale in execution.

The default judgment is also registered with all credit bureaus by the court. Usually it is almost impossible to get any credit while there is an active judgment registered against you. To have it formally removed you would need to obtain the claimant's permission to have the judgment rescinded at the issuing court (which they will only give if the debt is settled in full. To get the rescindment you will also have to pay a lawyer to file it for you at the court. Only then can you send the rescindment order to the credit bereaus and they will remove the active judgment lodged against your name.

What does the 'purely without prejudice part mean?

It means that nothing said during the negotions for repayment can be used against them to detract from their claim.

tldr Please reach a fixed and workable agreement asap as the alternatives are not pleasant.

 

[MJG]

Actually there is no need to go to court unless the defendant files a Notice of intention to defend with the claimant's attorney and the clerk of the court (for which it is best to use a lawyer).

If no notice of intention to defend is filed within 14 days of summons being served, a default judgment can be issued by the clerk of the court without the case being heard by a magistrate. Usually a Warrant of execution of moveable property is issued with the judgment. The Sheriff will then use the warrant to attach any goods he can find for sale in execution.

The default judgment is also registered with all credit bureaus by the court. Usually it is almost impossible to get any credit while there is an active judgment registered against you. To have it formally removed you would need to obtain the claimant's permission to have the judgment rescinded at the issuing court (which they will only give if the debt is settled in full. To get the rescindment you will also have to pay a lawyer to file it for you at the court. Only then can you send the rescindment order to the credit bereaus and they will remove the active judgment lodged against your name.



It means that nothing said during the negotions for repayment can be used against them to detract from their claim.

tldr Please reach a fixed and workable agreement asap as the alternatives are not pleasant.

At this point I feel I need to ask opinion on voluntary liquidation.
What happens to cellphone and vehicle in business name?

 

[muisnes]

At this point I feel I need to ask opinion on voluntary liquidation.
What happens to cellphone and vehicle in business name?

I have no personal knowledge of the processes involved during liquidation.

AFAIK a liquidator needs to be appointed and he/she will sell off all assets (like the vehicle) to settle the debts (on a pro-rata basis if the funds obtained are not enough). The cellphone contract will be cancelled if it is in the name of the company as the company will have to be de-registered with CIPC. Maybe the cellphone company will allow you to take over the contract in your personal capacity.

There is some info on the CIPC website that might be handy
http://www.cipc.co.za/index.php/man...-company/liquidating-or-winding-your-company/

 

[flyerflammingo]

At this point I feel I need to ask opinion on voluntary liquidation.
What happens to cellphone and vehicle in business name?

Duties of Company Directors when facing possible Insolvency

At the very first sign of the business coming into Insolvency, you as the director of the business owe a duty of care to the creditors of the business. Whatever business decision you take going forward from the date of first signs of insolvency, must now be for the benefit of all the business creditors as a group, in other words: If you trade while being insolvent, you can become personally liable as a director.

Obviously the best option for you will be to pay off all your business debts.

Another option would be to file a CM26Liq with CIPC (Old Cipro) to voluntary liquidate your business, this is cheaper as you do not have to go to Court. (You will opt for a creditors voluntary liquidation).

What happens next?

CIPC will deliver a copy of the CM26 liquidation application filed with them to the office of the Master of the High Court in your province, and then the Master of the High Court will appoint a liquidator to take over the administration of your business liquidation. You now wait for the liquidator to contact you. Please take note that the Master of the High Court only appoints a liquidator who is on the panel of liquidators (someone like me) and no one else to administer liquidations and sequestrations.

What happens to cellphone and vehicle in business name?

All the Company assets (vehicle & cellphone) after the appointment of a liquidator will vest in the liquidator, and the liquidator will sell the car and ask you to hand over the cellphone and will sell the assets either via auction or private sale (you can make an offer for the assets should you wish). All the funds raised from the sale of the assets will then pay all the business creditors as listed on the CM26 form or as proved at the creditors’ meetings.

The appointed liquidator will contact your business creditors (Wesbank, cellphone contact provider, etc,) to come and prove their claims against your business at the creditors' meetings if they wish.

After filing the CM26 with CIPC, you can take the CM26 certificate from CIPC to the courier company to show that you have filed for the liquidation of the business and refer them to the appointed liquidator to file their claim.

POSSIBLE CONSEQUENCES OF SIGNING AOD:

Signing the Acknowledgement of debt will have the effect of holding you personally liable for the business debts owed to the courier company, you effectively become the surety and the courier company now has the power to sue you personally for the debts incurred by your business, even after you have voluntary liquidated your business. In other words, if they get nothing from the liquidation of your business, the AOD now allows them to sue you personally to recover all monies owed by the business.

 

[muisnes]

POSSIBLE CONSEQUENCES OF SIGNING AOD:

Signing the Acknowledgement of debt will have the effect of holding you personally liable for the business debts owed to the courier company, you effectively become the surety and the courier company now has the power to sue you personally for the debts incurred by your business, even after you have voluntary liquidated your business. In other words, if they get nothing from the liquidation of your business, the AOD now allows them to sue you personally to recover all monies owed by the business.

It is possible that you will be held personally liable for the debt after signing the AOD, but it will depend on the precise wording.

"I, mr XX, in my capacity as director of YY pty ltd, acknowledges YY to be truly and lawfully indebted to ..."
vs
"I, mr XX, acknowledges myself to be truly and lawfully indebted to ..." (personally liable)
and everything in between.

 

[flyerflammingo]

It is possible that you will be held personally liable for the debt after signing the AOD, but it will depend on the precise wording.

A clever creditor will ALWAYS use the correct wording when drafting the AOD, as they have to protect themselves from the possible liquidation of your business.
Some creditors make you sign the AOD at the moment you take out a credit facility, and keep this document on file so as not to chase after you after you default.

But ultimately, various machinery have now been provided for by the many Acts for the recovery of Company debts from the Company directors in their personal capacities without limitation of liability.

Checkout:

Section 423 of the Old Companies Act -- Delinquent directors and others to restore property and to compensate the company.

Section 424 of the Old Companies Act -- Liability of directors and others for fraudulent conduct of business.

Also checkout:

Section 20(9) of the New Companies Act -- Piercing the corporate veil.

All in all, Creditors do not even need to have a signed AOD to sue directors in their personal capacities, they can make use of the mentioned sections to prove their case, and the High court will then issue an order against the company director for the payment of business debts if the Court is satisfied that the director should be held personally liable.

If the director fails to pay, then the Creditor can then file for a Sequestration order against the director personally using the order as issued by the high court as this order is akin to a liquidated claim and can be used to file for a compulsory sequestration. This then settles the claims as owed to the creditor/s.

 

[thehuman]

Hmm could he force them for a lower amount by saying he will have to go into liquidation become he can't afford r3k ?

What about business rescue?

 

[flyerflammingo]

I would not put it as "force them for a lower amount", but he can always negotiate with the creditors by making use of the provisions of section 155 of the New Companies Act, which govern Compromise between company and its creditors, and enter into a scheme of arrangement.

Furthermore he can always approach creditors for an informal arrangement of payment obligations.


But always remember, if he makes or offers to make ANY arrangement with any of his creditors for the re-arrangement of the payment of business debt, then this is seen as an Act of Insolvency, and any creditor can then liquidate the business by using this fact.

How about business rescue?

Yes, he can make use of the machinery provided by Business Rescue.
He has to show that the business is financially distressed and has reasonable prospect of being rescued.
Business rescue resolution can then be filed at CIPC or High Court. He will have to nominate a BR Practitioner, and get confirmation in writing from BR Practitioner before filing the motion.

Effect of business rescue:

Business rescue will have the effect of freezing all the business debt obligations and litigation by introducing a stay/moratorium/freeze. (to give the business a fighting chance).
A Business rescue plan will be drafted by the BR Practitioner for adoption by affected parties at the meetings of creditors/members.

If the BR Plan provides that creditors take a hair cut, then the business rescue plan will then effectively force every creditor to accept a lower amount, if this gets voted by majority as reckoned in number and value of claims of creditors (proved or not proved).