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South African Business Rescue Procedure

This publication sets out the law applicable to business rescue procedures in South Africa.

Publication Language: English
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This publication sets out the law applicable to business rescue procedures in South Africa.

In this publication, Dr Eric Levenstein examines the practical challenges of business rescue implementation in South Africa and particularly the development of legal precedent, thinking and interpretation of the provisions of Chapter 6 of the 2008 Companies Act. Weaknesses in the current legislation and the future of the business rescue process in South Africa are also considered, together with recommendations for change.

The publication should be of interest to directors of companies who might, at some point in the future, be exposed to a rapidly deteriorating state of financial affairs in a company and who will need to understand and unpack the obligation imposed on directors when deciding whether or not to place the company into a business rescue process, as opposed to carrying on the trade of such company regardless.

Chapter 6 of the 2008 Companies Act introduced a new business rescue regime for financially distressed companies. The publication revisits the reasons for the failure of judicial management in South Africa and the development of South African insolvency law and its impact on, and the need for reform in, business rescue practice prior to the final incorporation of Chapter 6 into the 2008 Companies Act. The development of rescue regimes applicable in foreign jurisdictions set the tone for development of business rescue practice in South Africa. By the South African government adopting many of the international core rescue principles applicable in foreign jurisdictions, South Africa has created a modern business rescue regime which mirrors similar systems abroad and which is aimed at saving financially distressed companies, preserving employment and restructuring the discharge of debt.

Rescue is a universal concept and one which is very much within the legal framework of restructuring, insolvency and rescue practitioners in various jurisdictions around the world. The publication stimulates continued thought and interaction amongst all stakeholders involved in business rescue and restructuring processes. This includes lawyers, law students, business rescue practitioners, creditors, financial institutions and economists who are interested in the impact that failed rescue and liquidations will have to the economy as a whole.

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Table of contents

CHAPTER_1 - Introduction

CHAPTER 1.1 - Background and overview

CHAPTER 1.2 - Objectives

CHAPTER 1.3 - Method

CHAPTER 1.4 - Structure

CHAPTER 1.5 - Limitations

CHAPTER 1.6 - Definitions and references

CHAPTER_2 - The development of insolvency law in South Africa: a shift from a pro-creditor to a pro-debtor culture?

CHAPTER_2.2 - Introduction

CHAPTER_2.3 - History and background

CHAPTER_2.4 - Advantage to creditors and its influence on the development of a pro-creditor culture

The socio political implications of debt in South Africa and the shift from a liquidation (pro-creditor) to a rescue (pro-debtor) culture

CHAPTER_3 - Judicial management, informal creditor workouts and the need for a corporate rescue model before the 2008 Companies Act

CHAPTER_3.1 - Introduction

CHAPTER_3.2 - The failure of judicial management

CHAPETER_3.3 - Informal creditor workouts and their contribution to business rescue

CHAPTER_3.4 - The need for a corporate rescue model in South Africa

CHAPTER_4 - International standards of best practice and international instruments used in insolvency and corporate rescue

CHAPTER_4.1 - Introduction

CHAPTER_4.2 - International standards of best practice UNCITRALs Legislative Guide on Insolvency Law

CHAPTER_4.3 - International instruments

CHAPTER_5 - Comparative corporate rescue culture and common rescue themes

CHAPTER_5.1 - Introduction

CHAPTER_5.2 - Modern rescue regimes

CHAPTER_5.3 - International corporate rescue culture

CHAPTER_5.4 - Creditors and the compromise of debt

CHAPTER_5.5 - Common rescue themes

CHAPTER_6 - The establishment of a business rescue regime for South Africa

CHAPTER_6.1 - Recognition of the failure of corporate rescue in South Africa

CHAPTER_6.2 - The law reform process in its political context

CHAPTER_6.3 - The development of a South African corporate rescue culture

CHAPTER_7 - Introduction to Chapter 6 of the 2008 Companies Act and definitions

CHAPTER_7.1 - Introduction

CHAPTER_7.2 - Chapter 6 of the 2008 Companies Act

CHAPTER_8 - Commencement and duration of the business rescue process

CHAPTER_8.1 - Commencement of business rescue proceedings

CHAPTER_8.2 - Voluntary commencement

CHAPTER_8.3 - Compulsory commencement

CHAPTER_8.4 - Duration of business rescue proceedings

CHAPTER_9 - The post-commencement business rescue process

CHAPTER_9.1 - Timelines in business rescue – an overview

CHAPTER_9.2 - The first meeting of creditors

CHAPTER_9.3 - General moratorium on legal proceedings

CHAPTER_9.4 - Management of the company in the rescue process: the business rescue practitioner

CHAPTER_9.5 - Treatment of creditors, employees and contracts

CHAPTER_9.6 - Financing the rescue: post-commencement finance

CHAPTER_9.7 - The business rescue plan

CHAPTER_9.8 - Discharge of debts and claims

CHAPTER_10 - Appraisal of South Africa's business rescue regime, and recommendations for further reform

CHAPTER_10.1 - Comparison with international rescue principles, best practice and common rescue themes

CHAPTER_10.2 - Shift from a pro-creditor to a pro-debtor rescue culture?

CHAPTER_10.3 - Appraisal of Chapter 6 of the 2008 Companies Act

CHAPTER_10.4 - Recommendations for further reform

CHAPTER_10.5 - Conclusion


Companies Act 71 of 2008 Chapter 6

Companies Regulations, 2011 Chapter 6

Companies Regulations, 2011 Selected forms

Table of cases