Online Reporter
Godknows (GK) Hofisi
I have written several articles on insolvency proceedings covering both corporate rescue proceedings and the liquidation of companies. In this article, I address the special meeting of creditors in the liquidation of companies.
Liquidation
As explained before, liquidation is the process of winding up a company. This is done by selling off the company’s assets and paying its creditors. If there is any residue, it is then distributed to the company’s shareholders.
Liquidation can be voluntary or involuntary.
Voluntary liquidation of a company
This can be done in terms of section 5 or 9 of the Insolvency Act (Chapter 6:07) or “the Insolvency Act”. Section 5(1)(a) provides for the voluntary liquidation of a company by an order of the Court whereby the company passes a resolution for voluntary liquidation and then makes an application to the High Court seeking the Court to grant a liquidation order, essentially to confirm the company’s resolution for voluntary liquidation.
Alternatively, voluntary liquidation can be done in terms of section 9, whereby the company passes a liquidation resolution and subjects the resolution to a vote by the company’s creditors.
In this case, the High Court is not involved.
Involuntary liquidation
Section 6 of the Insolvency Act applies. In this case, a creditor who has a liquidated claim may apply to a Court for the liquidation of the company. In the case of a company or private business corporation (“PBC”):
Corporate rescue proceedings have ended in the manner contemplated in part XXIII of the Act and it appears to the Court that it is just and equitable in the circumstances for the company to be liquidated.
It is otherwise just and equitable for the company to be liquidated.
According to section 6(2), a claim in respect of a liquidated debt which is payable at some determined time in the future may be taken into account.
Special meeting of creditors in liquidations
This is covered under section 51 of the Insolvency Act.
Requirement for a special meeting of creditors
According to section 51(1) of the Act:
The liquidator of an insolvent estate may at any time and must, if requested thereto by not less than one quarter in value of creditors who have proved claims against the estate, or at the request of the Master, or whenever a composition has to be considered, convene a special meeting of creditors of the estate.
The liquidator must convene a special meeting for the proof of claims if requested to do so by a creditor who tenders payment of the costs occasioned by the meeting.
Issues for consideration of a special meeting of creditors
This is addressed under section 51(2) of the Insolvency Act. According to the Act, a special meeting of creditors may deal with:
proof of claims against the estate
examination of any person in terms of the Act.
consideration of a composition
directives to the liquidator with regard to any matter affecting the liquidation of the insolvent estate.
Publication of notice in the Gazette
According to section 51(3) of the Act the liquidator must publish in the Gazette not less than 14 days before the date set for the meeting referred to in subsection 51(1) a notice of the time and place of the meeting and the matters to be dealt with.
Notice to creditors
According to section 51(4) of the Insolvency Act, the liquidator must, not less than fourteen (14) days before the date determined in the Gazette for the holding of the meeting, send by liquidator’s notice to every creditor whose name and address are known to him or her or which he or she can reasonably obtain and to the head office of every registered trade union which has notified the liquidator that it represents employees of the debtor:
a copy of any composition which is to be considered
a copy of any liquidator’s report contemplated in section 46(1) to be considered at the meeting;
a written draft of any resolution or direction which, in his or her opinion, should be taken or given at that meeting
a copy of the notice contemplated in subsection (3).
Exclusion of certain creditors
In terms of section 51(6) Act, the liquidator may at any time after his report has been accepted by creditors or by the Master, by notice in the Gazette, fix a date after which creditors who have not proved claims against the estate will be excluded from participation in any distribution in terms of an account lodged with the Master within two weeks after that date.
(7) The said notice must be published not less than four weeks before the date so fixed.
Conclusion
Section 51 of the Insolvency Act provides for a special creditors meeting in a liquidation.
Disclaimer
This simplified article is for general information purposes only and does not constitute the writer’s professional advice.
Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), Hons B.Compt (UNISA), CA(Z), ACCA (Business Valuations), MBA (EBS, Heriot- Watt, UK) is the Managing Partner of Hofisi & Partners Commercial Attorneys, a chartered accountant, insolvency practitioner, commercial arbitrator, registered tax accountant and advises on deals and transactions. He has extensive experience from industry and commerce and is a former World Bank staffer in the Resource Management Unit. He was recently appointed to sit on the Council of Estate Administrators in Zimbabwe. He writes in his personal capacity. He can be contacted on +263 772 246 900 or [email protected] or [email protected]. Visit www//:hofisilaw.com for more articles. Contacted on +263 772 246 900 or [email protected]
