According to Stats SA, the number of monthly liquidations in 2023 generally demonstrated a decreasing trend when compared to the previous years. In 2022, the number of liquidations continuously fluctuated throughout the year. April 2022 had the least number of liquidations recorded, which demonstrated some improvement since April 2021. Overall, the number of monthly voluntary company liquidations was significantly more prevalent than the number of monthly compulsory company liquidations.
The number of monthly compulsory company liquidations in January to August 2023 varied when compared to the previous years. Throughout 2022, the numbers continuously fluctuated but steadily decreased from October onwards. December 2022 had the lowest number of liquidations recorded, which demonstrated progressive improvements since December 2020.
Debt recovery goes almost hand-in-hand with insolvency, and we are beginning to see an uptick in activity as businesses across the board tighten their belts. For all businesses, cash flow is an issue, and the ability to pay invoices and collect payments is challenging.
South Africa narrowly escaped a recession in 2023. This was due to five industries recording negative growth between the second and third quarters of 2023. Old Mutual's chief economist Johann Els told 702 that it is highly possible the country will slide into a technical recession at the end of 2023.
It remains a difficult economic environment for businesses. Many of the support initiatives launched during the pandemic are also beginning to wind down. South Africa’s Covid grant schemes must eventually be repaid, and we expect the debt recovery process to start ramping up in the coming months.
With this in mind, the best advice we can give is to start thinking about cash flow, credit control and debt recovery now, before it becomes too late. The directors of small businesses, in particular, cannot afford to bury their heads in the sand and it is important that they know the options available to them if their financial situation changes.
While there is undoubtedly an emotional attachment to running your own business, there is also a degree of personal liability that comes if you are found to be trading while insolvent. Many directors have signed a personal sureity at some stage, likely thinking of it as paperwork in case of an emergency.
In reality, the legal process can kick in quite quickly for debt recovery and for sums much lower than you might expect. In some cases where goods have been supplied on credit and not paid, a limited company could be taken to court for small amounts of debt owed.
Directors have duties to manage a business appropriately and the only real protection against any of the debt recovery process going sour is to seek professional guidance from a specialist legal team, accountant or insolvency practitioner. There may be options to go into a six-month business rescue, or it may be necessary to apply for personal bankruptcy, but continuing to run an insolvent business will only cause further problems.
In many cases, the first demand and the threat of legal action is enough to prompt action for companies in debt. For those companies, they need to be aware of the personal liability and speed at which the situation may change, seeking advice from the right people to try and resolve issues before it is too late.
It might seem like a daunting prospect, but pick up the phone and start the conversation before it gets to the point of litigation. SMEs are the lifeblood of the South African economy and it is important that we do what we can to help them survive.
Read More Here: https://www.statista.com/statistics/1383276/number-of-monthly-voluntary-company-liquidations-in-south-africa/
If you require advice with regards to Sequestration, Voluntary Surrender, Business Liquidations, Insolvency, Bankruptcy or Credit Rehabilitation kindly contact SOLVENDI as follows:
National: 087 220 0710
Head Office: 012 003 3417
Email: consultations@solvendi.co.za
Website: www.solvendi.co.za for live chat or more information.
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