CIPC will not act against companies temporarily insolvent due to the national disaster
Provisions in the Companies Act meant to prevent reckless trading will not be invoked during the national lockdown, giving companies the leeway toThe Companies and Intellectual Property Commission told parliament’s trade & industry portfolio committee during an online briefing it will not invoke the reckless trading provisions if it has reason to believe that companies are temporarily insolvent due to the national disaster.
Many companies, some of which have been forced to stop trading under the lockdown regulations meant to curb the spread of the coronavirus, are struggling to stay afloat and are on the brink of collapse. According to corporate and commercial law firm Cliffe Dekker Hofmeyr, the leniency granted by the CIPC is arguably meant to allow companies to trade out of commercial insolvency. However, “companies must be vigilant not to open itself up to potential claims by third parties”.
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