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BUSINESS VALUATION

Musings on business value, sale preparation, sale negotiations, sale structure.

State of business disaster

On 24 March CIPC issued a “practice note“. It deals with the ramifications of the State of Disaster declared the previous week.
The bits that are important are the following:

  1. In light of the COVID-19 pandemic and the declaration of a national state of disaster [CIPC] will not invoke its powers under section 22 of the Companies Act, in the case of a company which is temporarily insolvent and still carrying on business or trading. This is only applicable where the Commission has reason to believe that the insolvency is due to business conditions, which were caused by the COVID-19 pandemic.
  2. This practice note shall lapse within 60 (sixty) days after the declaration of a national disaster has been lifted.

Section 22 of the Companies Act prohibits a company from trading under insolvent circumstances.

The State of Disaster was declared on 15 March 2020. It is valid for 3 months. The minister can extend it by 1 month at a time. She can also end it at any time.

As of today, 8 April, that means that the “practice note” could be in place until 14 August. That is if there are no extensions to or shortening of the initial state of disaster.
So for the next five months. Or maybe 6 months, or 7…
And then, of course, there will be inevitable delays as things catch up.

Reach your own conclusions. But 6 months seems to be important to me.

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