Shelter Chieza Change Management
A lot of justifications can be proffered on why many people do not like to discuss the possibility of their company’s bankruptcy or insolvency or processes related to winding down operations way before signs start showing.
It could be likened to the resistance that companies that sell funeral policies face. It is simply “unAfrican” to make your own funeral arrangements while you are still healthy and vibrant. It may be unfathomable to call a caucus to discuss these but businesses ought to plan for these in advance.

It is common to read stories of company directors declaring bankruptcy in our local papers these days.

There are some industries where estimations have been given on start-ups that fail within a period of one or two years.

Companies close for various reasons including bad business decisions, a sharp turn of events, increased competition, or maybe the sole founding director suddenly falling ill.

Sometimes you may not be able to afford to keep the business running another week and you have to make a rushed decision. You cannot just wake up with a sign that you have closed shop by your door.

Whichever way it is, properly terminating the activities of your company must be done with diligence.

You need to formally dissolve the business, communicate with all parties that were involved in the formation of your company of your intention, otherwise your records will stand and you will have a lot of accruals.

Because your business is incorporated, you must close the business as set out in your memorandum and articles of association.

Companies ought to be aware and know their financial liabilities. It may drive you into more trouble if you close a business and owe your creditors a lot of money. Another option would be to make an inventory list of all movable and immovable assets and sell them off to pay some of your debtors. Schedule an inventory liquidation sale.

If your existing inventory is not enough to cover your financial liabilities, consider other avenues and consult expert opinion on the best way to proceed. Schedule a closing sale to liquidate your inventory. Make sure you have a full, attractive inventory.

Those golden oldies and out-of-date inventory sell poorly, so you might have to spend money to make money. You will need to cut prices, but do not cut prices too low too early, or you will not have any room to cut them further.

You must also cancel all the licences, permits and insurances that you have.

If you are closing a business and do not intend to re-use the equipment, you might as well sell it. You might be able to sell shelving or displays at a liquidation sale, or you may need to contact a company that deals in shelving equipment. It would be great if you can sell your equipment to a store that needs more shelves or that is opening. Otherwise, plan to sell your equipment to the highest bidder.

Ensure that you communicate clearly to your employees of your intention.

Assure your employees of paying them their wages and dues within the period required and stated under the Labour Law. You may also be required to pay any benefits accrued, as well as unused vacation time.

If you are on rented premise, give your landlord adequate notice as stated in the lease agreement. Remember you have vendors that have supported you during the good days.

Notify them of your closure and pay outstanding bills. If it is not possible, ensure that each one has an agreed on payment plan.

Some may agree for you to return their products, work out a plan that shows all necessary supportive and detailed paperwork. If possible, you can do a clearance sale to recover some of the costs of goods not sold.

A partnership business requires a slightly different way of treatment because there should be unanimous agreement to fold up. Exiting a partnership or corporation is a process that can take from weeks to years depending on the size of the organisation and the reasons for exiting.

Designate a leader and organise a team to handle various closing tasks. Make sure you are covered from a legal sense to close your business. Franchises must satisfy certain legal requirements, or they may be obligated to continue paying for a lease on a store that has closed months ago.

Examine all contracts you have signed relative to your store, and make sure you are covered from a legal sense. If you are not sure, consult a lawyer, or hire a consultant who specialises in closing a business. The legal repercussions can be bleak, so it’s vital to proceed properly instead of closing first and dealing with the legal questions later.

Till next week, may God richly bless you.

  • Shelter Chieza is an Advisor in management issues. She can be contacted at [email protected]

You Might Also Like

Comments

Take our Survey

We value your opinion! Take a moment to complete our survey