Introduction
I have previously written that voluntary liquidation of a company can be done in terms of section 5(1) and section 9 of the Insolvency Act (Chapter 6:07) (hereinafter “the Insolvency Act”).
Voluntary liquidation under section 5(1) of the Insolvency Act
Under section 5(1) a debtor such as an insolvent company may apply to Court for an order to be liquidated for example:
- If the debtor / company itself has resolved that it be liquidated by the Court in terms of a liquidation resolution and the debtor is not prevented by law, agreement, or any other legally enforceable reason, from passing such resolution, or
- By the company or by one or more directors or by or more members for an order to wind up the company on the grounds of a deadlock that cannot be broken or it is just and equitable for the company to be liquidated.
My interpretation is that voluntary liquidation resolution passed by the debtor / company under this section requires approval of the Court following a Court application by the debtor/ company itself.
Voluntary liquidation under section 9 of the Insolvency Act
A debtor / company which is unable to pays its debts or whose liabilities exceed its assets, may be liquidated as a voluntary liquidation by creditors if the debtor / company has passed a resolution resolving that the debtor be liquidated voluntarily as a voluntary liquidation by creditors. My interpretation is that a voluntarily liquidation resolution passed by the debtor / company under this section requires the approval of the creditors.
Statement of Affairs
Both section 5(4) and section 9(5) of the Insolvency Act require that the debtor / company include its Statement of Affairs corresponding substantially with Form A of the First Schedule to the Insolvency Act.
I summarise below the key components of the Statement of Affairs based on Form A.
Part 1 – Balance Sheet
This is the Balance Sheet (or Statement of Financial Position) of the debtor / company showing:
- Debtor / company’s liabilities.
- Company’s assets split into immovable property, movable property and outstanding claims.
Part 2 – Immovable properties
This is a breakdown of the company’s immovable property into those situate in Zimbabwe and those situate outside.
Part 3 – Movable property
This breaks down the movable property of the debtor / company into property situate in Zimbabwe and that situate outside Zimbabwe.
Part 4 – Outstanding claims, bills, bonds
This part requires the split of the debtor / company’s outstanding claims, bills, bonds or other securities in Zimbabwe and outside.
Part 5 – List of creditors
This is an important part and consists of the listing of the debtor/ company’s creditors showing details of the creditor, the claim and any security.
Part 6 – Pledged movable assets
This part requires a listing of the debtor / company’s movable assets pledged, hypothecated, subject to a right of retention or under attachment in execution of judgment.
Part 7 – Books and documents
This part represents an enumeration and description of every book or documenting record in use by the debtor / company at the time of the liquidation or at the time when the debtor ceased carrying on business.
Part 8 – Causes of insolvency
This requires a detailed statement of the cause of the debtor / company’s insolvency.
Part 9 – Personal information a debtor who is a natural person
This applies to a debtor is who is a natural, and not juristic person.
Part 10 – Affidavit / solemn declaration
This is a declaration by the debtor or representative of the debtor / company that the statements contained in the Schedule are true and complete, and that every estimated amount therein contained is fairly and correctly stated.
Conclusion
A statement of affairs, as the wording implies, is essential a summary of the debtor/ company‘s state of affairs showing mainly the financial figures, reasons for insolvency and including a declaration by the debtor or its representative.
Disclaimer
This simplified article is for general information purposes only and does not constitute the writer’s professional advice.
Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), Hons B.Compt (UNISA), CA(Z), ACCA (Business Valuations) MBA(EBS, Heriot- Watt, UK) is the Managing Partner of Hofisi & Partners Commercial Attorneys, chartered accountant, insolvency practitioner, commercial arbitrator, registered tax accountant and advises on deals and transactions. He has extensive experience from industry and commerce and is a former World Bank staffer in the Resource Management Unit. He was recently appointed to sit on the Council of Estate Administrators in Zimbabwe. He writes in his personal capacity. He can be contacted on +263 772 246 900 or ghofisi@hofisilaw.com or gohofisi@gmail.com. Visit www//:hofisilaw.com for more articles.
