Liquidations up, insolvencies down

By Staff Writer

A company that can't pay its debts is declared insolvent; a company that is being sold off is liquidated. There have been new figures released by Statistics SA that show there has been a rise in the number of liquidations 35.8% in the first 7 months of 2009 compared to the same period in 2008. There has been a fall in insolvencies by 17.9% for the first 6 months of 2009 compared to the same period in 2008. This shows that while more companies are biting the dust less of them are going to the wall due to debts they can't service. What are the factors?

 

 

The majority of companies that were liquidated were voluntary liquidations, this means that more companies are looking at their future and not seeing one, so they are voluntarily closing their doors and selling off the assets of the company. The amount of companies that have been declared insolvent has dropped leading to the assumption that they are either dealing with their debt earlier or are voluntarily liquidating before it becomes a court ruling and an involuntary liquidation is ordered. With more companies liquidating the outlook becomes bleaker.

All business decisions should be taken on a business case basis. Hard looks at the actual realities of that company's balance sheet need to be taken, but bear in mind that negative, or positive, sentiment can skew this hard look, and a squint could lead to unnecessary steps being taken. If, however, there is no longer a business case then it makes sense to liquidate the company. In a recessionary environment these liquidations can be expected, but with a rise in liquidations and a drop in insolvencies it tends to ask the question: Are these companies going under due to fear of the recession and future liabilities or real business cases?

Recent Articles

Featured What happens to your medical aid when you move overseas?

While exploring a different country, you may rely on the built-in travel insurance that forms part of your medical aid. However, what happens when you stay for longer than a typical vacation? This week Justmoney has a look at what you should do with your medical aid if you decide to move overseas for a period of time.

Read more

How to apply for government funding for your start-up business

Starting your own business can be challenging, especially if you don’t have the capital to get it off the ground. Fortunately, there are many ways to fund a new business in South Africa. This week Justmoney found out more about these grants, how to apply for them, and what you can do to make your business stand out from the rest.

Read more

MoneySmart: Is it worth your while?

Budgeting apps have revolutionised the way in which consumers manage their finances. From being able to access all your bank accounts to gaining access to budgeting tools, savings structures, and having your spending habits tracked – all in the palm of your hand.

Read more

Local elections, international uncertainty: How will the rand respond?

As we dust off the Easter Holiday cobwebs, we enter the business end of the local election. This brings about a lot of local noise which could increase volatility in the rand. The market will look at any headline news which could lend short-term momentum to the rand after a period of range-bound trading. 

Read more

Sign Up

To our weekly newsletter for advice you can bank on

Deals

KFC Variety Boxes Special

Price: R95
When: Daily
Where: Online

Colosseum Hotel Weekend Special

Price: Available on request
When: Until 25 August
Where: Cape Town

XPRESSO Café Deal

Price: R10
When: Daily
Where: Cape Town