While the African Global Operations board announced it has decided to voluntarily liquidate the company, it could still be years before the company is wound down.
The board confirmed on Monday 18 February that it had made the decision after its bank decided to close their accounts – citing reputational risk. The move has put 4,500 jobs on the line.
Leander Opperman, partner and member of the Insolvency Law Team of Adams & Adams Attorneys, said ordinarily the liquidation process can be completed within three months.
“It could take some years, depending on the difficulties that the liquidators face to recover funds from creditors, and possibly if they have to investigate transactions which were concluded in certain circumstances by directors with suppliers if there is the talk of bribes. This is something the liquidators would have to investigate,” he says.
But what exactly is voluntary liquidation?
Opperman explains: “In terms of South African Company Law, a solvent company may be wound up voluntarily if the company has decided to do so. This decision is taken by the board of directors at a meeting called for this purpose. The board must pass a resolution providing for the voluntary winding up which resolution must be filed with the Companies office also known as CIPC.”
Opperman said once the resolution has been lodged, CIPC will communicate with the Master of the High Court who will, in turn, appoint joint liquidators to attend to the administration of the liquidation of the business of Bosasa.
He says the liquidators will then call for a meeting with the board in order to gain an understanding as to, among others, the reasons for the voluntary liquidation and the financial position of the company and will then prepare a report to creditors and employees dealing with the assets and liabilities of the company and ancillary matters.
“The liquidators will then proceed with the administration process which includes collecting of debts due to the company, valuing and realising assets of the company, receiving claims by creditors and employees of the company etc. Liquidators will also be responsible for the convening of creditors’ meetings at which the liquidators will seek directions from the body of creditors, ask creditors to vote on resolutions and to accept proof of claims by creditors and employees,” explained Opperman.
The attorney says the fate and well-being of the employees should be paramount in the minds of the board members. “There are many families who are dependent on the income earned by the staff.”
“Unless this company is sold as a going concern to another company which can continue with the business, then, unfortunately, these employees contracts are terminated by the liquidators. In as far as they have any unpaid wages, they are what are termed preferred creditors for the first three months of unpaid wages and the balance of any unpaid wages they will share in what’s termed the free residue, or what is left in the company after all the other creditors are paid,” he said.
Opperman believes it is improbable that the liquidators will sell the business of the company as a going concern.