Business Rescue in South Africa

RA Dr. Martin Wilhelm LL.M.

doi:10.5771/9783845283203

Summary

This book examines the South African corporate rescue law from a comparative and functional perspective. The central focus of the analysis is on how the law is able to reduce agency costs that arise in the vicinity of insolvency. Based on the three principal-agent conflicts from company law, this book focuses on the company-creditor conflict in the lead-up to insolvency. Three manifestations of this agency conflict are developed, and it is analyzed how these are addressed by the South African rescue law with selective references to the British, US, Australian and German laws. Given the recent reform of the South African rescue law, a further aim of this book is to provide an overview and examine selected problems thereof, having regard to legal historical and cultural aspects. While the first mentioned objective of this book should appeal foremost to law and economics scholars, the second mentioned objective should be of interest primarily to judges, legal practitioners and students.

Search publication

Bibliographic data

Copyright year: 2017
Publication date: 07.11.2017
ISBN-Print: 978-3-8487-3980-6
ISBN-Online: 978-3-8452-8320-3
Publisher: Nomos, Baden-Baden
Series: Studien zum Handels-, Arbeits- und Wirtschaftsrecht
Volume: 167
Language: English
Pages: 470
Product type: Book Titles

Titelei/Inhaltsverzeichnis No access Pages 1 - 28
1. 1. I. Introduction of topic; methodology, objectives and structure of study No access
  2. 1. 1. Basic elements of the principal-agent theory, agency problems in company law and an introduction to the role of the law in addressing agency costs No access
    2. 1. aa. General No access
        bb. Regulatory strategies No access
        cc. Governance strategies No access
      2. b. Enforcement No access
      3. c. Disclosure No access
    3. 1. aa. General No access
        bb. Value-minimising postponement of formal business rescue proceedings No access
        cc. Value-minimising invocation of formal business rescue proceedings No access
      2. b. Inter-creditor agency conflict outside formal insolvency proceedings No access
      3. c. The office holder-creditor conflict during business rescue proceedings No access
      4. d. The inter-creditor conflict during business rescue proceedings No access
  3. III. The protection of employees in insolvency proceedings No access
2. 1. I. Introduction No access
  2. 1. 1. a. The CBM in a nutshell No access
      2. b. Distribution of the assets in insolvency proceedings – perspectives from the CBM and financial economics No access
    2. 1. a. General No access
      2. aa. ‘Chameleon equity’ structure No access
        bb. Provision of a ‘menu’ of insolvency procedures No access
      3. aa. Immanent values and communitarianism No access
        bb. Broad-based contractarianism No access
      4. d. Misconception of the characteristics of the parties in the CBM’s ex ante position No access
  3. 1. 1. Inefficiencies of auctions No access
    2. 1. a. The Bebchuk model No access
      2. b. The Aghion, Hart and Moore model No access
  4. 1. 1. General, advantages of informal rescue mechanisms No access
    2. 1. a. Debt capital structure of companies No access
      2. b. The development of non-binding principles of informal rescue measures No access
    3. 3. A hybrid procedure – pre-packaged plans No access
  5. V. Summary and conclusion No access
1. 1. I. Introduction No access
  2. 1. 1. The regulatory system of insolvency law No access
    2. 2. Procedural interaction of insolvency procedures No access
    3. 3. Institutional setting – jurisdiction over insolvency law and regulation of insolvency profession No access
  3. 1. 1. General No access
    2. 2. The objectives of judicial management No access
    3. 1. a. Routes of entry and parties entitled to enter No access
      2. b. Appointment of judicial manager No access
      3. c. Entry grounds No access
    4. 4. The moratorium, treatment of security and quasi-security interests, uncompleted contracts and set off No access
    5. 5. Disposal of assets, post-commencement finance and governance of judicial management No access
  4. 1. 1. Scope of restructuring mechanisms available No access
    2. 2. Procedural requirements No access
    3. 1. a. General No access
      2. b. The continued insolvency of the company in the post-scheme period No access
  5. V. Summary and conclusion No access
2. 1. I. Introduction No access
  2. 1. 1. Objectives and entry requirements of judicial management too narrow No access
    2. 2. High direct costs of judicial management and the legislative scheme No access
    3. 3. Incompetence, lack of independence and perverse incentives of judicial managers No access
    4. 4. Problems under the debt consolidation scheme No access
  3. 1. 1. The regulatory system of insolvency law No access
    2. 1. a. The costs of moving between insolvency procedures No access
      2. b. Separation of the scheme of arrangement between shareholders and between creditors No access
      3. c. Need for a less onerous rescue procedure for small companies? No access
    3. 3. Institutional setting – jurisdiction over insolvency law and regulation of insolvency profession No access
  4. 1. 1. a. General No access
      2. aa. The content of the secondary objective No access
        bb. Compatibility of break-up sales with the secondary objective No access
        cc. Tension between the mandatory nature of the development of a rescue plan and the secondary objective of rescue No access
      3. c. The dual role of the rescue objectives No access
    2. 1. aa. Routes of entry, parties entitled to enter and point in time when the moratorium is effective No access
        bb. Ratification of nominated rescue practitioner in entry by court order and concept of ‘independent creditors’ No access
        cc. Entry grounds No access
        dd. Standard of proof of reasonable prospect of success of rescue entry ground No access
        ee. Challenges to out-of-court entry into business rescue proceedings No access
      2. aa. General No access
        bb. Addition of an out-of-court entry route by the company’s board No access
        cc. Earlier trigger of business rescue proceedings than under judicial management No access
        dd. Wider range of companies eligible for formal rescue than under judicial management No access
      3. c. Comparative perspectives of certain aspects of the out-of-court entry route with the UK and Australia No access
    3. 1. a. General No access
      2. aa. The meaning of any ‘legal proceeding, including enforcement action, […] in any forum’ No access
        bb. Types of assets caught by the phrase ‘property belonging to the company’ No access
        cc. Types of (security) arrangements caught by ‘property in the company’s lawful possession’ No access
    4. 1. a. Relationship between s 133(1), on the one hand and s 134(1)(b), (c) and s 134(2), on the other hand No access
      2. b. The scope of s 134(1)(b) and (c) No access
    5. 5. Disposal of the company’s assets during business rescue proceedings (s 134(1) and (3)) No access
    6. 1. a. General No access
      2. b. Relationship of s 136 with the statutory moratorium under s 133(1) No access
      3. c. Contractual restrictions on suspension and cancellation of contracts No access
      4. d. Material scope of suspension and cancellation of contracts No access
      5. e. General exemption of employment contracts from s 136 – some comparative perspectives from the UK, US and Australia No access
      6. f. Remedies available to counterparty No access
    7. 7. Post-commencement finance and general ranking of claims (s 135) No access
    8. 1. a. Operation of the management-displacing system of governance No access
      2. aa. General No access
        bb. Interpretational difficulties regarding non-codified common law duties No access
        cc. Duty to act in the best interests of the company and to act for a proper purpose No access
        dd. Difficulties with the analogous application of applicable directors’ duties to disclose relevant information to the board No access
        ee. The duty of care, skill and diligence No access
      3. aa. General No access
        bb. Removal for having a compromised relationship (s 138(1)(e)) No access
        cc. Removal for having a conflict of interest and for a lack of independence (s 139(2)(e)) No access
        dd. Relationship between removal grounds for lack of independence and for having a compromised relationship No access
      4. d. Brief overview of the plan procedure No access
  5. 1. 1. General No access
    2. 2. Scope of restructuring mechanisms available No access
    3. 3. Procedural requirements No access
    4. 4. The debt consolidation scheme No access
  6. 1. 1. General No access
    2. 2. The impact of legal culture and path dependence No access
    3. 3. The nature of the lending markets No access
  7. VII. Summary and conclusion No access
1. 1. I. Introduction No access
  2. 1. 1. a. The target of the duty No access
      2. b. The recipients of the duty No access
    2. 1. a. General No access
      2. aa. The recipients of the duty No access
        bb. The nature of liability No access
      3. c. The type of conduct prohibited and the course of action required to be undertaken No access
      4. aa. The applicable element of fault and its impact on the standard of the duty No access
        bb. The applicable test No access
        cc. The time at which the duty arises No access
      5. aa. Civil liability No access
        bb. Disqualification of directors No access
        cc. Issue of compliance notice by company law regulator No access
        dd. Gatekeeper control enforcement: The auditor’s and independent reviewer’s duty to report any ‘reportable irregularities’ No access
    3. 1. a. The time at which the duty arises and the course of action to be undertaken No access
      2. b. Civil liability and enforcement No access
  3. 1. 1. aa. The function and basic requirements of the undervalue transactions claw-back remedy No access
        bb. Explaining the gatekeeper control standards strategy with reference to the negligence-based trading standards strategy under the wrongful trading provision No access
      2. aa. General; relevance of further types of claw-back remedies to the problem of asset substitution No access
        bb. The South African claw-back remedy No access
        cc. The German claw-back remedies No access
      3. c. Conclusion No access
    2. 1. a. The elements of the delict No access
      2. b. Tensions between the law of delict and company law – perspectives from the UK No access
    3. 3. The development of a general directors’ duty to creditors in various common law jurisdictions No access
  4. 1. 1. Explaining the legal strategy No access
    2. 2. A critique of s 129(7) Companies Act 2008 No access
    3. 3. Weak enforcement of s 129(7) Companies Act 2008 No access
  5. V. Summary and Conclusion No access
2. 1. I. Introduction No access
  2. II. Theoretical foundations No access
  3. 1. 1. a. Setting out the legal strategy No access
      2. b. Discussion: Failure to distinguish appropriately between value-enhancing and value-reducing shareholder loans No access
    2. 1. a. Distinguishing recharacterisation and equitable subordination No access
      2. b. Factors determining whether shareholder loans should be recharacterised No access
      3. c. Effectiveness of eleven factor test in distinguishing value-enhancing from value-reducing shareholder loans No access
    3. 1. a. Setting out the legal strategy No access
      2. b. Problems of gatekeeper control enforcement No access
  4. IV. Comparative evaluation – perspectives from Germany and the US No access
  5. V. Summary and conclusion No access
3. 1. I. Introduction No access
  2. 1. 1. aa. Counteracting premature entry: The impending insolvency entry ground No access
        bb. Counteracting the entry of economically distressed companies: Economic distress entry ground No access
      2. b. The ex post standards strategy: Directorial sanctions for non-compliance with the impending insolvency entry ground No access
      3. aa. Challenges to the invocation of business rescue proceedings that counteract premature entry No access
        bb. Conversion to liquidation proceedings where the company is economically distressed No access
        cc. Conclusion No access
      4. aa. General No access
        bb. Relevant mechanisms in South Africa, the UK and Australia No access
      5. aa. Transition to alternative rescue procedures in cases of premature entry No access
        bb. Transition to liquidation proceedings in cases of the entry of economically distressed companies No access
    2. 2. The ex post standards strategy: Dismissal of Chapter 11 proceedings on the grounds of bad faith filings in the US No access
    3. 3. Conclusion No access
  3. 1. 1. a. Minimum qualification requirements of rescue practitioners in South Africa No access
      2. b. The Australian approach: minimum qualification and mandatory disclosure requirements supplemented by ex post sanctions for non-compliance No access
      3. c. Professional self-regulatory mechanisms in the UK No access
    2. 2. Ex post removal rights strategy: Removal of office holder for lack of independence and related ex post grounds No access
    3. 3. Conclusion No access
  4. 1. 1. General No access
    2. 2. Impact of the new rescue procedure on the prevalence of value-minimising debt consolidation schemes No access
    3. 3. Normative analysis of appropriate legal response to the underpayment of creditors and the underinvestment problem No access
    4. 1. a. Explaining the acquirer’s perverse incentive No access
      2. b. The need for legal protection in the first place No access
      3. c. The merits of the court-imposed contractual subordination No access
  5. V. Summary and conclusion No access
1. Bibliography No access
2. Commission reports, opinions, presentation, statistics No access
3. Dictionaries and Websites No access