Tag Archives: Business


Many businesses fail and consequently have to face financial crises that few recover from and in most instances, results in business owners shutting doors for good. If your business has no assets or liabilities, the more simpler process of deregistration takes place. The liquidation process needs to be followed if your business has assets, liabilities or both.

The Liquidation of Your Business

Liquidation is the process by which your company or close corporation effectively declares itself insolvent. Your business can undergo voluntary liquidation, where you choose to voluntarily liquidate it, or when you undergo compulsory liquidation through action by your creditors.

Once your business has been placed under liquidation, it will stop all its business activities in so far as may be required for the “winding-up”, i.e. the process of selling all the assets of your business, paying off your creditors, distributing any remaining assets to the partners or shareholders and then dissolving your business. A liquidator will be appointed to perform all these tasks.

The Consequences of Liquidation

When your business gets liquidated, all contracts concluded with the business remain in effect. The liquidator has to make the decision whether or not he/she intends to abide by the contract or to terminate it, which will depend on what would be the most beneficial decision to the creditors. However, if the liquidator chooses to terminate the contract, the other contracting parties have a monetary claim against the insolvent estate as a concurrent creditor, i.e. creditors who do not hold any security.

If you are a director and/or shareholder of your business, then you should be especially cautious when your business gets liquidated, because you will still be liable for debt for which you have signed surety, i.e. taking responsibility for another’s performance of an undertaking. If a director acted negligent or fraudulent in his/her capacity as the director, he/she can also be rendered personally liable.

The liquidation of your business does not terminate employment contracts; it is up to the liquidator to decide whether to do so or not, and this decision must be in line with the Labour Relations Act 66 of 1995, Basic Conditions of Employment Act 75 of 1997, and the Insolvency Act 24 of 1936. However, employment contracts are suspended upon liquidation of the employer; during this suspension period, the employee is not obliged to render any services to the employer, and he/she is not entitled to receive any payment or employment benefits that arise from the contract. An employee whose services have been terminated because of liquidation, is entitled to claim losses suffered from the employer’s liquidated estate.

Dealing with Your Taxes

SARS has a preferent claim in the business’s insolvent estate, meaning that SARS gets paid before the business’s concurrent creditors. If the business gets liquidated voluntary and there is still debt owed to SARS after the winding-up of the business, the shareholders may, in terms of the Tax Administration Act 28 of 2011, be held personally liable in certain circumstances. The Value Added Tax Act 89 of 1991 places you as a member or a director of the business, who has regularly partaken in the management of the company, in the position of a trustee of the government’s money and you will be held liable for the business’s VAT.

Other taxes are deemed to be civil debt, and money owed to SARS simply gets written off if SARS does not get a dividend from your business’s insolvent estate, or if your business is deregistered. However, SARS may issue criminal summons against business owners in this regard.


  • Smesouthafrica.co.za. (2017). When you have to liquidate your biz – 5 considerations you shouldn’t overlook. [online] Available at: http://www.smesouthafrica.co.za/16586/When-you-have-to-liquidate-your-biz-5-considerations-you-shouldnt-overlook/ [Accessed 23 Jun. 2017].
  • Investopedia Staff. (2017). Winding Up. [online] Investopedia. Available at: http://www.investopedia.com/terms/w/windingup.asp [Accessed 23 Jun. 2017].

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. (E&OE)


By Lebogang Mpakati

Independent Advisory (Pty) Limited

The aim of this document is to establish if Business Rescue can be described as successful or not in South Africa since promulgation.

What constitute success in terms of chapter 6 of Companies Act?

S128 (1b)(i)  define business rescue as proceedings to facilitate the rehabilitation of a company that is financially distressed by providing for – S128 (1b)(iii)The development and implementation, if approved of a plan to rescue the company by restructuring its affairs, business, property, debt and other liabilities and equity in the manner that maximizes the likelihood of the company continuing in existence on a solvent basis or if it is not possible for the company to so continue in existence, results in a better return for the company’s creditors or shareholders than would result from the immediate liquidation of the company.

The first requirement of a successful restructuring is for the business to, in fact, emerge from the process as a going concern.  A further test is to assess the post-business rescue results of the entity as to its operating performance whether it continues to operate on a sustainable basis without being liquidated further down the line. This will constitute a successful restructuring of the business that emerges from business rescue.

Defining success in chapter 11 cases can be somewhat difficult. Success in chapter 11 is really a function of your perspective. A “successful” chapter 11 may be a success to a secured creditor and a disappointment to an unsecured creditor and a dismal failure to equity holders. (Thomas J. Salerno, Jordan A. Knoop and Craig D. Hansen)

With regards to the American Bankruptcy Institute publication, a critical difference between the 17% of successful non- “mega case” reorganisations and the 83% “might have beens” is the formulation of a well-defined exit strategy, i.e. what exactly does the company wants from the reorganization, and how, from a business perspective, does the company plan to achieve it? All and too often the company has only one desire from a bankruptcy filing: stop a pending foreclosure or other action by a creditor or group of creditors. This myopic analysis results in a reactive reorganization.

The most important determinant of a company’s likelihood of emerging successfully from these legislation, was the company’s size (measured by assets at the time of the bankruptcy petition – – see Hotchkiss (1993) and more recently by its ability to secure debtor-in possession financing (DIP) or post commencement finance (PCF) (Dahiya et al (2003).  Size and access to PCF are, not surprisingly, highly correlated.

In terms of S128 (1b)(iii) of Chapter 6, If it is not possible for the company to so continue in existence, the reorganization must result in a better return for the company’s creditors or shareholders than it would result from the immediate liquidation of the company. This option can be pursued as an alternative success outcome. However, this statement is not acceptable by many role players within the SA regime of business rescue as per the Business Enterprises at University of Pretoria (Pty) Ltd report prepared in March 2015 for CIPC.

In accordance with Business Enterprises at University of Pretoria (Pty) Ltd report prepared in March 2015 for CIPC it mentioned that from the substantial implementations filed (COR 125.3) the available figures refers to terminations only and appears to be 132/1398 = 9.4%. The statistics kept by the CIPC do not distinguish between the different options that are regarded as “success in business rescue” as it does not provide for recording the specifics for reorganization vs better return than in Liquidation (BRIL).

The Act further makes provision for another alternative if reorganization is not possible i.e. Section 155 – Compromise between the company and its creditors, Section 155. This alternative is not unique to Chapter 6 in South African context and can be found in similar legislation for Canada, UK and Australia.

Other options although not specified in the Act itself, it appears that the “spirit” of the Act provides for actions that are associated with the “benefit of the common” that includes business in general, economic growth and employment protection (section 7). Thus, alternatives such as business sales through mergers or acquisitions can be contemplated as successful outcomes as per the Business Enterprises at University of Pretoria (Pty) Ltd report prepared in March 2015 for CIPC.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)


By Hillary Plaatjies

of Independent Advisory (Pty) Ltd

It is clear from case law and the applicable sections in the Act that the current legal position regarding the liability of sureties for the debts of a company in business rescue, is not settled.  There are different interpretations and views regarding this which are illustrated by the various court cases and contrasting judgements.

Scope of applicable law, legal principles and case law:

Section 133(2) of the Companies Act 71 of 2008 states that during business rescue proceedings, a surety by the company in favor of any person may not be enforced by any other person against the surety except with the leave of the court.  This have the effect that the company under business rescue may not be sued by the creditor.  The Companies Act (“the Act”) is not clear as to whether this protection afforded to the company under business rescue, is also applicable to sureties and co-principal debtors of the company and the question is whether the moratorium is applicable to the sureties.   Since the inception of the Companies Act, it has been left to the courts to determine the extent of the protection to which the sureties and co-principal debtors of the company is entitled to.

Section 155(9) of the Act states that a compromise with the creditors of the company, does not affect the liability of a person who is a surety of the company.   In Investec Bank v Andre Bruyns 2012(5) SA 430 (WCC), it was held that the moratorium and protection under Section 133(2) of the Act is a defence in personam for the company under business rescue and this protection does not extend to the sureties of the company.  This have the effect that a creditor can enforce payment of the debt against the surety during business rescue proceedings.  This can only apply where no business rescue plan has been approved yet because the company can be discharged of its debts at a later stage in terms of an approved business rescue plan.

In African Banking Corporation of Botswana Ltd v Kariba Furniture Manufacturers (Pty) Ltd & Others 2013 (6) SA 471 (GNP) the court held that the liability of sureties is not affected and they remain liable.  In DH Brothers Industries (Pty) Ltd v Gribnitz NO & Others 2014(1) SA 103 (KZP) it was held that if the plan provided for a discharge of the main debt and the creditor acceded to it, then the common law position will be applicable which would have the effect that the liability of the surety for the debt will no longer exist.

Section 154(2) of the Act states that where a business rescue plan has been approved and or the implemented in accordance with the Act, a creditor is not entitled to enforce any debt owed by the company prior to commencement of the business rescue proceedings, except to the extent provided for in the business rescue plan.

In the case of Tuning Fork (Pty) Ltd v Green and another 2014 JOL (WCC), it was held that unless otherwise stated in the business rescue plan, a creditor may not proceed against any person who signed as surety for the debtor company in business rescue after the adoption of the business rescue plan which provides for the discharge of the debt by agreement between the debtor company under business rescue and the creditor or release of such debtor company’s obligations to the creditor.  In the Tuning Fork case, it appears as if the judge held the view that where there is no statute dealing with this situation, the common law must be followed and under the general principals of suretyship, if a debtor has been released of his liability, the surety is also released from such liability.

The Act does not make provision for the situation where a business rescue plan have been adopted and what the effect is on the sureties of the company.  Where a compromise was entered into by the company, with its creditors, Section 154(2) of the Act is applicable which states that the liability of sureties is not affected.

In Blignaut v Stalcor (Pty) Ltd 2014 JDR 0349 (FB), the court held that it could not have been the intention of the legislature to also give sureties and co-principal debtors the same protection that it gives the company.

Section 154(1) of the Act provides that if business rescue plan is implemented in accordance with the terms and conditons, the creditor who has acceded to the discharge of the debt in whole or in part, will lose the right to enforce the relevant debt.


The purpose of the Act includes inter alia to provide for the efficient rescue and recovery of financially distressed companies in a manner that balances the rights and interests of all relevant stakeholders”.   It was never the intention of the legislator, to extent the same protection to sureties that it provides to the principal debtor.   The legislator would have made provision in the Act for such protection to the sureties.  The purpose of the suretyship, is to ensure that the creditor receives payment in the event of failure to pay the debt by the principal debtor.  Suretyships is for the purpose of protecting the creditor and to ensure that the creditor can pursue his claim against the surety and co-principal debtor.

The liability of the surety is not affected by the business rescue of the principal debtor.  Creditors must ensure that a business rescue plan must make specific provision for the situation of the sureties and that the business rescue plan preserve claims against sureties.

Alternatively, guarantees from third parties for the principal debt or obligation must be obtained rather than to rely on the suretyships as the only form of security.  The claim against the surety must be preserved by stipulation in the business rescue plan, so that the principal debt is not discharged by way of release of the principal debt in a business rescue plan.  Specific inclusion of the preservation of this claim in the Business Rescue Plan is of utmost importance.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. (E&OE)


Leaders in Restructuring, Business Rescue and Corporate Recovery Services in South Africa

Economic and market conditions continue to pose both short- and long-term risks for even the most well-planned of businesses.

Our experienced restructuring and recovery team has been able to help save many financially distressed businesses utilising restructuring and business recovery strategies, guiding them through their financial crisis with understanding, integrity and professionalism.

Difficulties mastered are opportunities won.” ~ W Churchill


 Whether a business is looking to redress under performance, enhance stakeholder value or resolve a crisis, our professionals have a proactive, innovative and entrepreneurial approach to problem solving. We provide positive and commercial solutions and advice for businesses in crisis and to funders of those businesses.

Our services cover the following areas:

  • Restructuring and Business Recovery
  • Corporate Finance
  • Business Rescue
  • Business Broking
  • Independent Business Reviews
  • Management  Support Services
  • Turnaround Management


  • Independent Advisory is a leading provider of corporate restructuring services in South All assignments are led from the top and supported by a talented team of consisting of nine practitioners and a national network of professional staff with collective experience of over 80 years operating throughout the country.
  • We strive to understand the perspective and requirements of each client, always providing an independent and objective approach towards achieving the right way forward for the business
  • We have demonstrable experience of cross-border corporate recovery assignments and our team has significant experience of operating in overseas
  • We can also call on assistance from professionals from multiple jurisdictions around the world through our membership of HWW Insolvency Cooperation Partners, enabling us to be at the forefront of the latest restructuring
  • Countries include Argentina (Beunos Aires) Austria (Vienna) Australia (Sydney) Brazil (Sao Paulo) Cayman Islands (Grand Cayman) Czech Republic (Prague) Eastern Europe, France (Paris)  Germany (Hamburg)  Great Britain (London)  Hungary (Budapest)  India (New Delhi)  Italy (Rome)  Mexico (Mexico City)  Netherlands (Amsterdam)  Poland (Warsaw)  Republic of China (Hong Kong)  Romania (Bucharest)  Russia (Moscow) Spain (Barcelona)  Sweden (Stockholm) Switzerland (Basel)  USA (New York)
  • We have acted for overseas funders and stakeholders as well as international companies with business activities and interests in South Africa and have hands-on experience of executing restructuring and re-organization activities across multiple

Independent Advisory has been involved and restructured a wide variety of matters over the entire spectrum of the economy and have provide services in the following industries:

  • Mining and Minerals
  • Agriculture
  • Automotive Industry
  • Retail
  • Financial Sector
  • Construction
  • Property
  • Film Industry
  • Manufacturing
  • Information Technology
  • Engineering


Directors of Independent Advisory

Directors of Independent Advisory

Senior Business Restructuring, Rescue and Reorganisation Specialists

Senior Business Restructuring, Rescue and Reorganisation Specialists

Business Rescue and Recovery Specialists

Business Rescue and Recovery Specialists


The firm has evolved since 1996 from a Corporate and Commercial law firm to being one of South Africa’s leading insolvency practices and recovery advisors.  The firm re-launched itself into the market in 2004 as Independent Advisory (Pty) Ltd with a national and international footprint and embodies a proudly South African ethos.  The directors, partners and employees are members of the South African Restructuring and Insolvency Practitioners Association as well as Insol International.  The managing director was a director of Insol International.  The optimum use of the latest technology ensures that communication and service to our clients are faster, effective and efficient.

Business Rescue procedure serves as a safety net which ensures that businesses in financial distress are able of being rescued or restructured.  We strife to build long lasting and mutually beneficial relationships with our clients by providing personalized professional services.



We look forward to working with you.


Owning a business requires careful succession planning and is part of your estate planning as you have to determine who will succeed you, or who will purchase your shares, or who will be entitled to the income after your death. The future ownership of your business is at stake.

A Partnership automatically dissolves upon the death of a partner and the remaining partners will then have to dissolve it and divide the assets amongst them.

In the case of a Company the shareholders may agree that:

  1. The remaining shareholders have a right of first refusal to purchase the deceased shareholder’s shareholding, as opposed to dealing with it in a will.
  2. The future of ownership of shares can be regulated by a written agreement between shareholders that is referred to as “buy and sell” agreement and has an influence at the death of a partner or shareholder.
  3. The buy and sell agreement compels the executor of the deceased to offer the shares at a pre-determined price, and life policies between shareholders normally cover the purchase price.
  4. The remaining shareholders are the beneficiaries of the policy on the life of the deceased and use it to purchase the shares, normally pro rata to the shares they already own.
  5. Buy and sell policies fall outside the deceased estate and are not subject to estate duty provided that three requirements are met:
    • None of the premiums should have been paid by the deceased;
    • The shareholder relationship must have existed at the time of death;
    • A written agreement must exist.
  6. When the skill and knowledge of a partner is essential for the survival of the business, “key man insurance“ can be taken out on the life of such a partner or shareholder. The premiums are paid by the business and the benefit is paid to the business to prevent financial loss or to appoint and train a replacement.

In the case of a “sole proprietor”, succession planning is dealt with in the Last Will and Testament.

  1. All the value of the business vests in the deceased estate.
  2. Planning is essential as the business terminates at death, although the executor may sell it as a going concern.
  3. It is a good idea to grant a right of first refusal to an associate, who can purchase the business and intellectual capital at the time of the death.
  4. A life policy can provide for cover on the life of the owner, with the associate being the beneficiary, and the proceeds at time of the death utilised to purchase the business.
  5. It deserves no debate that planning increases the benefit for the estate as opposed to closing the business down, where the assets will be worth far less.

Continued succession planning must be part of your business strategy to ensure your hard work benefits the right people.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.