Fewer firms liquidated

2011-01-28 00:00

ALTHOUGH the total number of liquidations remains high by historical standards, the worrying growth in the number of companies that have had to wind up their affairs has decreased over the past year.

This is evident from the latest statistics on liquidations and insolvencies, which lends weight to the belief that the modest economic recovery is firmly on track. Furthermore, the number of insolvencies recorded continues to decline, suggesting that individual consumers are keeping their heads above water financially.

Statistics SA said this week that the number of liquidations in 2010 declined by 3,4% to 3 992 year on year, while the figure plummeted by 14,9% to 325 in December 2010.

“The 3,4% decrease in the total number of liquidations for 2010 was due to a decrease of 3,7% in compulsory liquidations and a 3,4% decrease in voluntary liquidations. Close corporation liquidations decreased by 8,5% while company liquidations increased by 2,6%,” Stats SA said in a statement.

It estimates that the total number of insolvencies in November 2010 declined by 28,7% year on year — a trend that has been evident for the past 18 months.

The major casualties of liquidations were businesses operating in the wholesale and retail trade, catering and accommodation, financing, insurance, real estate and business services.

LIQUIDATION refers to the winding-up of the affairs of a company or close corporation when liabilities exceed assets — and it can be resolved by voluntary action or by an order of the court.

Insolvency refers to an individual or partnership that is unable to pay its debt and is placed under final sequestration. Civil judgments are decisions in a civil matter or a dispute between two parties. Civil summonses are notices to appear before a court when a dispute between two parties has to be heard (that is, not for a criminal offence).

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