Both processes involve converting assets of the company/estate into cash to pay the administration costs of the company/estate and to distribute any residue to creditors of the company/estate who have proved claims. Once a company/estate is liquidated/ sequestrated the company/person no longer has the power to dispose of its property. The powers of the company/person are vested in the liquidator/trustee appointed by the Master of the High Court.
Court applications launched to liquidate a company/sequestrate an estate involve a two-step process (a provisional order, followed by a final order). Accordingly there is a need to appoint a provisional liquidator/trustee to look after the estate until the final order is granted and a final liquidator/trustee is appointed.
The Provisional liquidator/trustee must ascertain the existence and whereabouts of assets of the company/estate and preserve them by taking physical control of them until a final liquidator/trustee is appointed. For this reason the provisional and final liquidators/trustees are required to furnish security to the satisfaction of the Master for their performance while they hold office. The value of security is determined by the Master after having due regard to the value of the company’s/estate’s assets as at the date of liquidation/ sequestration order.
Shackleton Risk (via its Underwriter, Safire Insurance Company Limited (“the Insurer”) furnishes the bond of security also known as a suretyship, guaranteeing the proper administration of, and accounting by liquidator/trustee for all funds and property of the Company/estate under his/her administration as required by law.
The provision of a suretyship is not an indemnity policy but rather an accessory agreement by which the surety binds itself to the Master for the liquidator/ trustee’s performance whilst in office. As with all suretyships, should the principal debtor (liquidator/ trustee) default, and the surety have to make good any loss arising from the default of the liquidator/trustee the surety has a right of recourse against the principal debtor for that amount which he has paid to the Master.
The value of the bond of security (suretyship) can be reduced during the winding up process as and when assets are sold, and upon finalisation of the estate the bond (suretyship) must be reduced to nil such that the surety can be released from it’s obligations assumed under the bond (suretyship).
At Shackleton Risk we have representatives in every province to offer administration support to bonding clients for the duration of the bond.
Security bond premiums for liquidation/sequestration matters are set by the Master of the High Court. The premium is an annual premium of 0.5% plus VAT on the asset value of the estate and shall renew annually at the same rate or a reduced rate depending on whether the liquidator/ trustee has realised assets.