The Herald (Zimbabwe)

First, special meetings of creditors in liquidatio­ns

- Godknows Hofisi

IN simple terms, liquidatio­n refers to the winding up of an insolvent debtor entity (juristic person) or an insolvent estate of a natural person.

It usually involves the sale of the insolvent debtor’s assets, payment of liquidatio­n costs and payment (usually in part) of the proven creditors’ claims.

In Zimbabwe liquidatio­ns are governed by the Insolvency Act (Chapter 6:07) of 2018 (or “the Act”).

In terms sections 4-12 in Part II of the Act, an insolvent debtor may be liquidated in terms of:

◆ An applicatio­n by the debtor for liquidatio­n of the

estate of a natural person or partnershi­p,

◆ An applicatio­n by the debtor for the liquidatio­n of a trust, company, private business corporatio­n, co-operatives or other debtor,

◆ An applicatio­n by a creditor for the liquidatio­n of

debtor’s estate in terms of section 6,

◆ Liquidatio­n of partnershi­p estate,

◆ Voluntary liquidatio­n of insolvent debtor by res

olution,

◆ Voluntary liquidatio­n of solvent company. This article focusses on the first as well as subsequent special meetings of creditors in a liquidatio­n.

First meeting of creditors

Section 50 of the Act applies.

A creditor is a person (natural or juristic) who is owed money by a debtor, in this case an insolvent debtor.

In very simple terms an insolvent debtor (natural or juristic) is one who is unable to pay his or her liabilitie­s as they fall due or whose liabilitie­s exceed assets.

Section 50(1) provides that a liquidator appointed in terms of section 41 must by notice in the (Government) Gazette and in a newspaper widely circulated in the district in which the business is carried on, and after consultati­on with the Master (of the High Court) regarding the time and place of the meeting, convene a first meeting of creditors to be held within 60 days of his or her appointmen­t.

The notice of the meeting must state the time and place of the meeting and the matters that will be dealt with and must be published not less than 14 days before the date fixed for the meeting.

The liquidator must, at least 14 days before the date determined in the Gazette for the holding of the first meeting of creditors, send by liquidator’s notice to every creditor whose name and address are known to him or her, which he or she can reasonably obtain:

◆ A copy of the notice of the meeting,

◆ A copy of the report on the affairs of the debtor and business transactio­ns entered into before the liquidatio­n, as contemplat­ed in section 46(1),

◆ A copy of the inventory report contemplat­ed in

section 46(2), not 42(6).

◆ A copy of the valuation contemplat­ed in section

42(13), not 42(11).

◆ A written draft of any resolution or directive which in his or her opinion should be taken or given at that first meeting,

◆ A copy of the notice of the first meeting contem

plated in section 50(2).

◆ A copy of any compositio­n (arrangemen­t with

creditors) which is to be considered.

In terms of section 50(4) the liquidator must lodge with the Master or Magistrate who is to preside at the meeting on or before the second working day before the date determined for the meeting of creditors:

◆ A copy of the report on the affairs of the debtor and business transactio­ns entered into before the liquidatio­n, as contemplat­ed in section 46(1),

◆ A copy of the documents contemplat­ed in section 50(3)(c), (d), (e), being a copy of the inventory report as per section 46(2) (not 42(6)), a copy of the valuation contemplat­ed in 42(13) (not 42(11) and a written draft of any resolution or direction which in his or her opinion should be taken or given at that first meeting.

In terms of section 50(4) the first meeting may deal with the following:

◆ Proof of claims by creditors,

◆ Considerat­ion of the report of the liquidator,

◆ Nomination and appointmen­t of one or more

co-liquidator­s,

◆ Considerat­ion of a compositio­n (arrangemen­t with

the creditors),

◆ Giving directives to the liquidator on matters affect

ing the liquidatio­n.

Special meetings of creditors

Section 51 applies.

The liquidator may at any time and must, if requested by at least 25 percent of creditors in value, who have proved claims, or at the request of the Master, or whenever a compositio­n has to be considered, convene a special meeting of creditors.

A special meeting of creditors may deal with: ◆ Proof of claims,

◆ Examinatio­n of any person in terms of the Act, ◆ Considerat­ion of compositio­n,

◆ Directives to the liquidator with regard to any mater

affecting the liquidatio­n.

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), CA(Z), MBA(EBS,UK) is a legal practition­er / conveyance­r with a local law firm, chartered accountant, insolvency practition­er, registered tax accountant, consultant in deal structurin­g, business management and tax and is an experience­d director including as chairperso­n. He writes in his personal capacity. He can be contacted on +263 772 246 900 or gohofisi@gmail.com.

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