When to Hire a Liquidation Lawyer: Signs Your Company Needs Legal Assistance
The primary reason that a company should consider briefing liquidation lawyers is when the company is experiencing financial distress. The Companies Act 71 of 2008 defines “financially distressed” in section 128(f) as when it appears to be:
“(i) Reasonably unlikely that the company will be able to pay all of its debts as they fall due and payable within the immediately ensuing six months, or
(ii) Reasonably likely that the company will become insolvent within the immediately ensuing six months.”
Hiring a liquidation lawyer can be essential when your company is facing financial distress and is considering or undergoing the process of liquidation because it is insolvent. Legally a company is referred to as insolvent when its liabilities exceed its assets, the test being whether the debtor’s liabilities, fairly estimated, exceed their assets, fairly valued. In practice financial distress manifests as the inability of the company to meet its financial obligations, an insurmountable amount of debt and severe cash flow problems.
Signs Liquidation Lawyers are Needed
In cases where a company is receiving frequent communications, legal notices or letters of demand from creditors and negotiations are becoming increasingly difficult, liquidation lawyers can guide companies through these interactions. Liquidation lawyers will relieve some of the pressure while the best strategy for the company is formulated.
When a company is consistently unable to pay its debts as they become due, this is a strong indication that the business is no longer financially viable, and some form of intervention is required. Liquidation might be necessary, but it is not the only option open to the company. Experienced liquidation lawyers will know which option provides the best outcome for the specific circumstances of the company.
Where a trend of consistent decline in revenue is experienced, and the company is unable to reverse the trend, the assistance of a lawyer should be considered. When a company’s assets are no longer generating sufficient value to cover company debts, liquidation lawyers can guide you through the process of selling or disposing of these assets to maximise recovery for creditors.
If a company is struggling to pay its employees, is considering retrenchments, or cannot provide employee benefits, legal advice is essential to help ensure compliance with labour laws during the liquidation or any other remedial process. Liquidation or business rescue involves various legal and regulatory requirements that have to be met. A liquidation lawyer can help ensure that you comply with all necessary laws and regulations during the process.
It can be critical for companies with complex business structures, involving subsidiaries, joint ventures, or international operations, to brief competent lawyers to assist in navigating the legal complexities of the liquidation process. In cases where there are allegations of fraud, mismanagement, or wrongful conduct by the company’s directors or officers, legal assistance can help protect their interests and rights during the liquidation. If there are disputes among shareholders about the liquidation process, liquidation lawyers can help mediate and ensure the disputes are resolved equitably.
Experienced liquidation lawyers can provide tailored advice based on a company’s specific situation. They can guide the company through the legal complexities of the liquidation process, help protect stakeholder’s rights and interests, and ensure that the process is carried out in compliance with applicable laws and regulations.
Look for Experience and Expertise
Francois Uys Incorporated Attorneys excel in the realm of insolvency law and insolvency litigation. We have a team of seasoned legal practitioners specialising in matters of liquidation and company debt. With over three decades of experience in debt, insolvency, and liquidation matters, the team at Francois Uys Attorneys Inc. are able to offer indispensable assistance throughout the intricate legal processes. We offer expert facilitation, implementation, and ongoing guidance to clients. Count on us to navigate you through the crucial strategic decisions while safeguarding your interests. Connect with us today and be assured of the best possible outcome for your company.
Disclaimer: This article is for information purposes only. It does not constitute legal advice and cannot be used to make any legal or business decisions. For advice on the topics of insolvency, company liquidation, business rescue, sequestration, and debt restructuring contact Francois Uys Inc Attorneys. The information is relevant as of the date of publishing.
