Setting aside dispositions – a practical approach

Every disposition of its property by a company, made after the commencement of the winding-up, shall be void, unless a court orders otherwise. The commencement date is also important when considering certain dispositions which were made within or longer than six months before the commencement date.

Therefore, an earlier concursus date is always preferred by liquidators and creditors.

The commencement date of a winding-up depends on whether the winding-up is compulsory or voluntary and whether it is a winding-up of a solvent or insolvent company. For present purposes, we will only discuss the commencement date in the winding-up of insolvent companies.

• Compulsory winding-up

Section 348 of the Companies Act, No 61 of 1973 (Companies Act) states that if a company is wound-up by the court, the winding-up shall be deemed to commence at the time of the presentation to the court of the application for the winding-up (the date of the issuing of the
winding-up application);

• Voluntary winding-up of an insolvent company

Section 352 of the Companies Act states that a voluntary winding-up shall commence at the time of the registration in terms of s200 of the special resolution authorising the winding-up.

It is possible for a compulsory winding-up and a voluntary winding-up to overlap. This can happen where the voluntary process is commenced after an application for the compulsory winding-up of the company has been issued, but before the winding-up order is granted.

The following question then arises: When was the concursus established? This question was recently answered by the Supreme Court of Appeal (SCA) in Afrisam (SA) (Pty) Ltd v Maleth Investment Fund (Pty) Ltd (651/2018) [2019] ZASCA 139 (01 October 2019).

In short, the SCA held that when a company is placed into voluntary winding-up after a compulsory winding-up application has been issued, but before the court order in the compulsory winding-up application is granted, the “deemed commencement date” of the winding-up will be the date of the registration of the voluntary winding-up, as determined by s340(2)(a) of the Companies Act.

Creditors beware

Litigation is a time-consuming process and it could take between one to two years to obtain a compulsory winding-up order in an opposed winding-up application. The long period that creditors have to wait for an order to place a company under compulsory winding-up is often prolonged by business rescue proceedings being instituted, while the compulsory winding-up application is pending.

Therefore, should a company, which is being wound-up, be concerned about certain dispositions that were made within six months prior to the winding-up application being issued or any disposition made after the issuing of the application, the board of directors can delay the commencement date of the winding-up proceedings by deliberately placing the company into voluntary winding-up, before the compulsory winding-up order is granted by the court. Even if a compulsory winding-up order is thereafter granted by the court, the “deemed commencement date” for purposes of s340 of the Companies Act will be the date that the voluntary winding-up is registered.

As a result of the delays associated with litigation, attorneys are often expected to think outside the box and to present solutions to achieve urgent recoveries. Therefore, we recommend that creditors, prior to launching winding-up applications, request an undertaking that the board of directors will not place the company under voluntary winding-up, pending the outcome of the compulsory winding-up application, once issued. If the board of directors refuses to provide such an undertaking, we believe an argument can be made by the creditor to proceed with an urgent application for a provisional winding-up order (at least) as the delay of the establishment of the concursus creditorum could have a prejudicial effect on the setting aside of certain dispositions.