© 2010 Grant Thornton International. All rights reserved. Role of the Legal Practitioner in INSOLVENCY LAWS & LIQUIDATIONS Dr. R. T Muza. DAcc.; CPA(Z);

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Presentation transcript:

© 2010 Grant Thornton International. All rights reserved. Role of the Legal Practitioner in INSOLVENCY LAWS & LIQUIDATIONS Dr. R. T Muza. DAcc.; CPA(Z); CPFA (Canada); AZICA; CGA-Canada; AAIA (UK); ACCA; CA(L); CPA; Registered & Practising Public Auditor (Z) and

© 2010 Grant Thornton International. All rights reserved. WHO QUALIFIES FOR APPOINTMENT? Persons: Registered with Council of Estate Administrators. and with Master’s office. Have performance guarantee/security

© 2010 Grant Thornton International. All rights reserved. The Environment of Trustee/ Liquidator

© 2010 Grant Thornton International. All rights reserved. Upset Creditor or Voluntary Act by Directors; a key element to kick start the process Creditor or members cause application by a lawyer to High Court & recommends Trustee/JM. Master takes interim control of the company and hands over to an appointed Trustee/JM under insolvency Act. Master directs or imposes conditions providing for the vesting of powers under relevant Acts. JM takes control of property, assets, rights and liabilities connected with the troubled company

© 2010 Grant Thornton International. All rights reserved.

Staffing: Fill gaps with your skilled resources to manage the business You chair and drive the process

© 2010 Grant Thornton International. All rights reserved. Disgruntled directors have a right to appeal JM appointment  If they can prove that financial reports are reliable,  Demonstrate ability to service obligations, and they can pay on spot  Prove their activities comply with applicable laws and regulations.

© 2010 Grant Thornton International. All rights reserved. The Trustee/JM is appointed by the Master after recommendation by the Creditor in consultation with their Lawyer The Master hands over interim control to the appointed Trustee/JM, but supervises the process, Creditors submit claims to the JM at the High Court Voting for JM is done by creditors and by their number and or by value VOTING PROCESS AT MASTER’S OFFICE...

© 2010 Grant Thornton International. All rights reserved. Consequences of JM appointment Only the Directors lose their office upon commencement of Trusteeship/JM

© 2010 Grant Thornton International. All rights reserved. – Section 52 to 55 deal with the conduct of meetings. Note that the Master is key in all the meetings. – All the questions coming or arising before a meeting shall be decided by a resolution passed by a majority of the votes cast and, in the event of an equality of votes, the master shall revert to value. – Voting is by show of hands or any mechanical way the master approves. – The meetings are held in public at the Master’s office, expect negative reporting by disgruntled former directors and consult as much as possible. Do not bottle up issues. Quorum and meetings

© 2010 Grant Thornton International. All rights reserved. Section 74 covers this. E.g.. Unregistered under Estates Admin Act 27:20; Relatives; Conflicting interests to those of creditors.; Their accountant/ bookkeeper/Auditor in past 12 months; An insolvent person. Conviction of an offence and sentencing to imprisonment Disqualification of Trustees/JM

© 2010 Grant Thornton International. All rights reserved. The Trustee/ JM duties Takes control over assets and liabilities Opens new bank account titled …SO SO SO …(Under JM) as appropriate Maintains books of accounts and receipting Reports to creditors and Master Refer sections 83 to 98 (Insolvency Act) Attends meetings of creditors and stakeholders

© 2010 Grant Thornton International. All rights reserved. Records required Maintain clear and concise records that can permit performance of a normal audit of the JM work. A set of documents which is prepared, collated, clearly referenced and put in an appropriate order by the Trustee to support the figures in the trial balance and ultimately in the financial statements is important. Over documentation can create problems for the JM.

© 2010 Grant Thornton International. All rights reserved. Submits form of liquidation account Submits form of distribution and contribution account JM tables accounts for inspection at the court Submits form of trading account Investigation report Causes an audit of his work Reports by the Trustee/JM to Court

© 2010 Grant Thornton International. All rights reserved. Liquidation account Shows receipts e.g.. – book debts collected – Proceeds of movables sold Payments egg. – Taxed bill of costs of sequestration – Costs of finding security – Deputy Sheriff’s account – Costs of advertising – Bank charges – Master’s fee – Trustee/Liquidator’s remuneration The Liquidation account

© 2010 Grant Thornton International. All rights reserved. This statement shows; – Claim number – Name of creditor – Total claim by a creditor – Secured portion of claim or portion preferent – The portion of the claim that is concurrent – Actual award portion in secured amount – Concurrent dividend – Total award – Deficiency (loss) Distribution account

© 2010 Grant Thornton International. All rights reserved. – JM to expect grilling from creditors and other stakeholders – Use a good skills mix – I.e.. Invite your Lawyer or Accountant to meetings Use of IT, PowerPoint CREDITORS’S MEETINGS

© 2010 Grant Thornton International. All rights reserved. Transparency in the Process Focus is on compliance with the law, Ensure that creditors & other stakeholders are clear of the process. Your fees must be approved first by the Master before you can draw them. Work with a PAAB registered accountant PAAB registered accountants are qualified members of either; ACCA or CA or CIMA or CIS or CPA Your remuneration as a Trustee is set out in the Act.