Surge in struggling SA businesses as liquidations rise by 34.6%

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‘If a company is unlikely to pay its debt or unlikely to be solvent in the next six months, then it's a prime candidate for business rescue. The purpose of that business rescue would be to avoid that company going into liquidation,’ says Vincent Manko, director of Dispute Resolution at Cliffe Dekker Hofmeyr.

You can also listen to this podcast on iono.fm here. ADVERTISEMENT CONTINUE READING BELOW JEREMY MAGGS: In January this year, South Africa witnessed the closure of 109 businesses, marking a substantial 35% surge from the corresponding period last year. According to the latest data from Stats SA, there was a notable 34.6% uptick in the overall number of liquidations in January this year compared to January last year.

The economy is not really doing that well. So those are the main reasons that companies are going into liquidation.VINCENT MANKO: That is so, that is correct. As you say, there’s been about a 34.6% uptick in overall liquidation numbers in January 2024 compared to the same time last year. The stated purpose of business rescue is to promote innovation, investment in the South African market, and also to provide a framework for the rescue of companies and that is done in two ways. But before I get there, let me just maybe explain why companies would go under business rescue… So that means if a company is unlikely to pay its debt or unlikely to be solvent in the next six months, then it’s a prime candidate for business rescue.

JEREMY MAGGS: One of the problems is the business rescue practitioner wants to stay on in the job as long as possible because it’s a revenue stream.

 

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