LIQUIDATION OR BUSINESS RESCUE?

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In difficult economic and political circumstances, as currently experienced by SA, members of close corporations or directors of companies often find that the business of the CC or the company is no longer operating profitably. This is when the question about liquidation or business rescue is posed and consideration should be given to which is the best option for the company or CC.

If the company or CC can not reasonably pay all its debts as and when it becomes payable in the next six months or if there is a reasonable likelihood that the company or CC will become insolvent in the next six months, the obligation rests on the company or CC to decide whether it is a candidate for business rescue or otherwise liquidation.

In a business rescue, room is afforded to a company or CC to work out a rescue plan in consultation with all stakeholders in terms of which transactions and/or contracts are restructured or canceled to improve the company or CC's cash flow or debt position in order to continue its normal trading activities. In consultation with the creditors, a plan is drawn up and the Business Rescue practitioner is obliged to implement the plan.

If the plan fails, the Business Rescue Practitioner will put the company or CC into liquidation.

If it is clear that the company or CC cannot at all fulfill its obligations and is insolvent, business rescue will not be the appropriate course of action and the company or CC should be liquidated. Parties often take shortcuts and think that liquidation can be prevented by placing the company or CC in business rescue, instead of liquidation. If the company or CC does not have a good chance of rescue from the start and there is no feasible business rescue plan, the directors or members will only waste money and time by considering business rescue. It will simply not work.

The big difference between business rescue and liquidation is that in the case of  business rescue, a plan is developed to restructure the company's finances and contracts so that it can survive financially and continue as a healthy business. If a company's liabilities exceed its assets, it is insolvent. In such an instance it would not be a candidate for business rescue and should be placed in liquidation.

Business rescue and liquidation can be initiated by a special resoltion or by a court application as the case may be.

For any further information or advice regarding the above, please contact Danie Acker at Rauch Gertenbach Attorneys, tel 044-6019900 or by e-mail at office@rgprok.co.za .
 

Matrimonial Systems, the Law of Succession and Miscellaneous

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Persons who are married in community of property often make the remark when drafting a will in terms of which they nominate the survivor as the sole heir/heiress of the estate of the first dying: "If he / she dies, I inherit everything". Although it is true that the survivor gets everything, it is incorrect to say "I inherit everything". 

A spouse in a marriage concluded in community of property is already the owner of half of the joint estate. The survivor, therefore, is the owner of half of the joint estate due to the matrimonial property regime of in community of property and therefore does not inherit the entire joint estate. In other words, the survivor inherits only half of the joint estate (the deceased's half) because the other half of the joint estate already belongs to him / her. If in this case, a person dies intestate (without a will), the surviving spouse retains half of the joint estate as his / her property and the other half (deceased's half) devolves upon the deceased’s intestate heirs.  

The Intestate Succession Act stipulates that the surviving spouse is entitled to inherit an amount equal to R250 000 or a “child's share”, whichever is the greater. If half of the joint estate is R250 000 or less, the surviving spouse will inherit the deceased's entire estate (half of the joint estate). However, if half is greater than R250 000, it becomes more complicated and a “child's share” must be calculated and compared to R250 000 to determine which is greater. If the “child's share” exceeds R250 000, the surviving spouse will inherit the former. If the “child's share” is less than R250 000, the surviving spouse will inherit R250 000. The remainder of the deceased's intestate estate is divided between his other intestate heirs.

If persons are married out of community of propertysubject to the accrual system, the accrual claim must first be calculated. The spouse entitled to the accrual claim must first be awarded same before the estate of the deceased can be distributed / wound up.  The person who acquires the accrual claim, acquires it by virtue of the matrimonial property regimeout of community of property  to which the accrual system applies and is thus not inherited by virtue of succession.

An antenuptial contract  in respect of a marriage outof community of property may contain provisions directly relating to the distribution of an estate. It is also not uncommon for spouses married out of community to be joint owners of assets and / or businesses such as partnerships and other legal entities. These are important aspects to identify to ensure that each player's legitimate claims are met.

For more information please contact Barend Kruger at office@rgprok.co.za
 

THE SALE OF A DECEASED'S HOUSE

Nothing in life is guaranteed except death and taxes. In practice, it is common practice for us, at Rauch Gertenbach, to transport property under a contract of sale where one of the parties has died. Imagine a scenario where you have made an offer on your dream home and the owner has accepted it. Your mortgage has been approved and you have already notified your landlord that you will vacate at the end of the month. To your shock, you now hear from the transport attorneys that the seller died in a freak car accident over the weekend. What to do now?

First of all, it is important to understand that the fact that the seller / owner is now deceased does not invalidate the contract of sale and the contract does not expire if he has signed it before his death. On the contrary, there is still a valid, enforceable agreement in place and, as a buyer, you still have the right to transport the property into your name.

The Act requires the Master of the Supreme Court to appoint an executor who can provide transport on behalf of the deceased. In practice, this means that the deceased's estate must be reported to the relevant Master's Office and upon receipt of the executor's letter, the executor appointed by it may sign the necessary transport documents for transport. This process can take anything from a month to several months depending on the relevant Master's Office.

A distinction must be made between whether the contract has been entered into by the seller during his lifetime and whether it has been signed by the executor after the seller's death. If the purchase contract has been signed by the executor, the Act further requires that the relevant Master agrees to the sale of the property and all the deceased's heirs must consent in writing to the sale. This process can once again take anything from a month to several months.

It should be borne in mind that transfer duties will still be payable despite the fact that the seller has passed away. Buyers (and sellers) should note that the sale of real estate will affect his will. Our office will be happy to assist you with free advice and assistance in setting up or updating your will.
Should you require any further information, do not hesitate to contact Paul Delport or Jaco Fourie on 044 601 9900 or office@rgprok.co.za .