Chris Fick & Associates

article-5-july-bDebtors faced with liquidation often ask their creditors for time to realise their assets “to best advantage” rather than by “forced sale”.  But per a recent High Court decision, creditors are not obliged to wait.

A property-owning company, defending itself against a liquidation application brought by the bondholder, was found to be “commercially insolvent” but nevertheless asked the Court to exercise its discretion to refuse the order “because the applicant is more than covered by abundant security in respect of its claim. Liquidation will simply result in the forced sale of assets which far exceed any claim that the applicant has against the respondent.”

In rejecting the debtor’s request and granting a liquidation order to the bondholder, the Court commented: “To my mind however this misses the point, which is that it is the applicant which is entitled to payment without further delay. It is not that the applicant should have to wait indefinitely for payment so that the respondent can realise its assets to its own greatest advantage in the normal course. The fact that the applicant holds security for its claim makes no difference since the security itself does not automatically translate into immediate payment.”

Of course corporate debtors might still in appropriate cases be able to seek protection in the form of business rescue – provided that they qualify and are able to formulate a rescue plan that is both genuine and viable.  Take advice in doubt.

If you want to get in touch with us to act in respect of any matter stated herein, please send an email to info@chrisfick.co.za

© DotNews, 2005-2013. 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.

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