Critical analysis of the business rescue regime in the Companies Act 71 of 2008



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I, (Name) wish to announce that all contents of this work / memory stand in my own work without any support, and this thesis / dissertation has been no research on the academic and professional in the past. It also represents my own views and not closely related to the university.

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DECLARATION

I, [name of the author], hereby declare the best of my knowledge, the entire contents of this thesis represent my real job, and that such a thesis was submitted prior to any academic research or other qualifications. In addition, the researcher represents his own personal opinions and do not have anything to do with them at university.

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TABLE OF CONTENTS

ACKNOWLEDGEMENTii

DECLARATIONiii

TABLE OF CONTENTSiv

CHAPTER 01: INTRODUCTION1

Background2

Point of departure3

Overview of Judicial management4

Problem statement4

Hypothesis4

CHAPTER 02: REVIEW OF LITERATURE5

Judicial management6

Business rescue8

Company policies9

Legislature10

Policies relating to Taxation11

Judgments on business rescue12

Benefits of tailored corporate rescue laws14

CHAPTER 03: METHODOLOGY16

Qualitative research17

Descriptive come Explanatory Research18

Cross Sectional19

Timescale19

References20

CHAPTER 01: INTRODUCTION

The companies Act 71 was introduced as a framework for all types of organization of different sizes. The intention was to promote innovation, employment, international competitiveness, confidence, and good governance. It was introduce in 2008 and on 27th June, it was published for comments. Large number of oral representation and written comments were presented to the Portfolio committee on Trade and Industry during the public hearings. The bill was finally approved by the parliament after incorporating elements form the suggestions which had a significant impact on it. The Companies Act 71 of 2008 created the Takeover Regulation Panel (TRP) to replace the previous Securities Regulation Panel. Sections 117 to 127 and the takeover regulations do not apply unless a transaction is an affected transaction or offer as defined in section 117. Section 48 (8) (b) says that, subject to the requirements of Sections 114 and s 115, if considered alone or together in a series of affected buy back transactions, then this transaction has to be conducted in terms of sections 114 and 115.

This means a private company could become classified as a regulated company. What happens if a private company does not make the necessary application to the TRP because of ignorance? This area poses a grave potential risk for secretarial practitioners and company secretaries who do not advise companies correctly. These regulations constitute an 'overkill' procedure that doesn't accord with the 'small company intent' of the new Companies Act. A possible solution is for all existing shareholders of the private company to sign a document to the effect that no shareholder is prejudiced.

Background

South Africa introduced its corporate rescue procedures, labeled as judicial management, in the Companies Act 46 of 1926. The problem was that, until recently, this mechanism to assist businesses in cases where it is better to continue operations, did not work. It led to many businesses in financial distress immediately being liquidated without any rescue attempt. Research published over the past two decades has indicated these problems and deficiencies, and called for a reform of corporate rescue legislation. In 2004, Department of Trade and Industry (the DTI) published a policy document dealing with guidelines for corporate law reform. One of the areas for review focused on the current system of judicial ...