General power, duties of a liquidator

Liquidation, in the case of a company, is the process of winding up that business.

In this article I look at the general duties and powers of liquidators based on Section 49 of the Insolvency Act (Chapter 6:07); the Insolvency Act or the Act applies.

This section regulates the general duties and powers of the liquidator of an insolvent estate, which include those explained below.

In terms of section 49(1) the liquidator must proceed forthwith to recover and take into his or her possession all the assets and property of the insolvent estate. He or she must apply the assets and property to satisfy the costs of administration of the estate and creditors’ claims.

The liquidator must deal with any remaining cash balances in terms of the Act.

According to section 49(3), the liquidator may perform any act which is necessary for the proper administration of the estate. Unless required by the Act, the liquidator needs not obtain formal authorisation for the performance of any such act.

The liquidator may, on behalf of the estate, execute all deeds, receipts and other documents. He may prove claims in the estate and receive payments or dividends connected thereto.

The liquidator may carry on the business of the debtor or any part thereof only insofar as it is necessary to enable expenses of the estate to be paid.

Section 4 of the Insolvency Act bestows a lot of powers to the liquidator if he or she has been authorised by the Master or by resolution of a meeting of creditors of the estate.

The powers include the following:

Engage in civil proceedings for the estate.

Submit to determination of arbitrators any dispute concerning the estate.

Compromise or admit any claim lodged by creditors.

Disallow or reduce a claim.

Carry on the business or part of the business of the debtor in accordance with the directions of the Master or the creditors.

Exercise his or her election in respect of contracts entered before liquidation.

Sell or alienate property of the insolvent estate subject to the directions of the Master or creditors of the estate.

Engage professionals for services required for the estate.

Deal with debt on behalf of the estate.

For a debtor who is a natural person or individual, make available to the debtor or his or her dependants a sum of money or assets for his or her dependants.

In terms of section 49(6), before a final order for the liquidation of a debtor’s estate has been issued the powers in section 49(4) may only be exercised with the consent of the debtor, management of the debtor or the court.

In terms of section 49(5) the Master must authorise the liquidator only if the authority is required so urgently that the liquidator cannot obtain a resolution at a first meeting.

According to section 49(8), a liquidator may at any time approach the court in regard to any matter arising from the liquidation and the Court may give directions or grant the liquidator the powers necessary for the proper administration, liquidation and distribution of the insolvent estate. Section 49(9) empowers the liquidator to deal with the tax issues of the insolvent estate.

Section 49(10) gives power to the liquidator, with the written approval of the Master and by standard notice to the Registrar of Deeds, to cause a caveat to be entered against transfer of immovable property belonging to a debtor who is a natural person.

Conclusion

Section 49 of the Insolvency Act (Chapter 6:07) gives wide ranging powers to the liquidator of an insolvent estate but also places on him or her certain duties.

Disclaimer

This simplified article is for general information purposes only and does not constitute the writer’s professional advice.

Godknows Hofisi, LLB (UNISA), B.Acc(UZ), Hons B.Compt (UNISA), CA(Z), MBA(EBS, Heriot-Watt, UK) is the Managing Partner of Hofisi & Partners Commercial Attorneys, chartered accountant, insolvency practitioner, 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 writes in his personal capacity. He can be contacted on +263 772 246 900 or ghofisi@hofisilaw.com or gohofisi@gmail.com. Visit www//:hofisilaw.com for more articles.-herald