AN APPRAISAL OF THE S.A. INSOLVENCY LAW REFORM PROGRAMME AND SOME POINTERS FOR NAMIBIA Paper prepared by: André Boraine

Transcription

1 AN APPRAISAL OF THE S.A. INSOLVENCY LAW REFORM PROGRAMME AND SOME POINTERS FOR NAMIBIA Paper prepared by: André Boraine 2015

2 Part A: Various aspects 1 BACKGROUND (Pre 2008) ADVENT 1980 s SAL(R)C PROJECT Namibia: independence 1990 INTERIM MEASURES like 1993 and 2002 amendments 2002: new labour package NB NCA 2005 (CAA) Companies Act of

3 1 BACKGROUND (Pre 2008) 1995 Financial contracts 1996 First (comprehensive) report (notion single act) 2000 Second report: Bill and Explanatory Memorandum 3

4 1 BACKGROUND (Pre 2008) 2003 CABINET APPROVAL To proceed and include companies as well DTI and Justice? OTHER MEASURES AND INITIATIVES Individuals: Reform administration orders: suspended 2005 NCA debt review 4

5 2 BACKGROUND (Since 2008) Companies New Companies Act 2008, 1 May 2011 Judicial management replaced by business rescue Liquidation: solvent companies Insolvent companies still to be liquidated ito 1973 Companies Act until new harmonised insolvency legislation Close corporations in process of being phased out RSA Worldbank ROSC

6 3 National Credit Act Replaced Credit Agreements Act: New credit regulation framework: mainly consumers Debt review for individuals Impact on administration orders Credit information reform Credit bureaus 6

7 4 SME s and Co-ops New SME ministry! Co-operatives 7

8 5 Director s liability Currently s 424 of (former) Companies Act 24 of 1936: reckless trading 2008 Companies Act Proposed extension of s 424 Insolvent trading 8

9 6 Rescue Former judicial management and s 311 compromises replaced with BR for companies and existing close corporations Chapter 6: Companies Act 2008 Business rescue S 155 Compromises 9

10 6 Rescue Informal Rescue for other entities Banks, Insurance companies etc Business trusts, partnerships -? Latest proposals 10

11 7 Insolvency Framework Both SA and Namibia fragmented SA after 2008 Companies Act, even more so.. Pending a new Insolvency regime? Liquidation culture SA: New rescue regime Proposal for single, unified act 11

12 8 Administration of process Notification procedures: Current Proposed Moratorium Rescue Liquidation Appointment liquidator Current and Proposals 12

13 8 Administration of process Creditor passivity Creditor committee for unsecured proposed Sale of assets as going concern [s 38 Ins Act] Rescue replaced judicial management Initiate Moratorium 13

14 8 Administration of process Post commencement finance Priorities Labour Professional BRP Tax dispensation 14

15 9 Netting Section 35 A and B of Insolvency Act Transactions in principle insulated from voidable dispositions, unexecuted contract rules and setting aside of set-off except: Fraud Also applies to bank insolvency and business rescue 15

16 10 Priority regime Former proposals (liquidation/ sequestration) Administration costs Employees Maintenance claims in arrears (individuals) Abolish tax priorities(preferences etc)? Contributions? Difference: in liquidation and rescue 16

17 11 Cross-border issues Current common law position Acceptance of UNCITRAL Model Law in SA: Cross-Border Insolvency Act of 2000 But Designation! 17

18 12 Judiciary Various efforts to make courts more accessible in SA Extension of civil jurisdiction of regional magistrates courts Aligning rules of courts Mediation Tribunals 18

19 13 Insolvency practitioners Trustees/ liquidators (Master) Requisitions Proposed dispensation: Minister designate professional bodies Qualifications and regulation Policy [Current constitutional issue] Business Rescue Practitioners (CIPC) 19

20 14 Security interests SA and Namibia same system No floating charge (but notarial bond) Immovables: registered in Land registry Movables: Pledge Hypothec Lien Notarial bonds registered in Land Registry 20

21 14 Security interests Notarial bonds Special General NCA: system of recordation of Credit agreements but not to establish security interests Register of security rights in movables? 21

22 PART B: 15 Insolvency and Business Recovery Bill South Africa s IBRB 30 June 2010 Working Document in form of the Insolvency and Business Recovery Bill (IBRB) [explanatory memorandum?] 2015 update of Working Document Liquidation and restructuring (payment plans) Single Act approach, but rescue company and cc Companies Act,

23 15.1 IBRB 2015 (Structure) Unified Bill (well almost): 25 Chapters, with schedules and forms Ch 1 Definitions; Ch 2 Acts of insolvency and ways to liquidate various debtors; Ch 3 Special provisions; Ch 4 Liquidation orders and commencement of liquidation; Ch 5 Effect of liquidation; Ch 6 Rights and obligations of debtor during insolvency; Ch 7 Impeachable dispositions; Ch 8 Effect of liquidation on certain contracts; Ch 9 Appointment of liquidator; Ch 10 Powers and duties of liquidators; Ch 11 Meetings; Ch 12 Claims;. 23

24 15.1 IBRB (Structure) Ch 13 Election etc of liquidators; Ch 14 Rights and duties of creditors; Ch 15 Cost of liquidation and application of free residue; Ch 16 Sale of property; Ch 17 Banking accounts, investments etc; Ch 18 Estate accountants, distribution and contribution; Ch 19 Rehabilitation of natural persons; Ch 20 Special provisions relating to trust, company, cc and association debtors in liquidation, Ch 21 Personal liability for fraudulent reckless or insolvent trading; Ch 22 Compositions; Ch 23 Rescue; Ch 24 Offences; and Ch 25 Cross-border insolvencies; followed by Schedules and Prescribed Forms 24

25 15.2 IBRB (Definitions) CL 1: DEFINITIONS Associate Debtor Liquidation resolution 25

26 15.2 IBRB (Definitions) Security (definition extended) special bond, landlord's legal hypothec, pledge, including a cession of rights to secure a debt, right of retention, reservation of ownership, financial lease, or any such right over property in terms of any other Act standard notice' by registered mail, fax, or personal delivery 26

27 15.2 IBRB (Liquidation Procedures Ch 2) Cl 3 and 4: Liquidation procedures Voluntary: Natural person and others Cl 5: Application by creditor R2 000 liquidated claim Basis unable to pay debt / or insolvent Other requirements Company or CC 27

28 15.2 IBRB (Liquidation Procedures) Cl 6: Liquidation of partnership Cl 8: Voluntary by resolution Other than nat pers or partnership When debtor passed resolution Cl 9: Special provisions for certain debtors? Like insurance companies; banks; pension funds; medical schemes, co-operative, friendly society 28

29 15.2 IBRB (Liquidation Procedures) Cl 11: Final liquidation order Cl 13: Notice 29

30 15.3 IBRB (Effect on property) Effects of liquidation: natural persons Ch 4: Custody and control of property Cl 14(1): Liquidation order or resolution: all property of debtor regarded as being in the custody and under the control of the Master until appointment of liquidator Vesting v conrtol 30

31 15.4 IBRB (Effect: Impeachable transactions) Ch 6 - Cl 17 29: Impeachable transactions/ voidable dispositions Almost the same as 1936 Insolvency Act, no undue preference though, time periods differentiation between associates and others Cl 24: Certain contributions to pension fund recoverable 31

32 15.4 IBRB (Effect: Impeachable transactions) Cl 25: Attachment of property in possession of associate Cl 25(1): If liquidator suspects that disposition by debtor to associate, voidable, may instruct sheriff to attach such property (current s 21 - sic!) Cl 25(3)-(5): court application to relieve, and when evident not needed sheriff must release 32

33 15.5 Chapter 7: Unexecuted contracts Ch 7 - Cl 30-36: Unexecuted contracts General principle not in IBRB Former s 35 (immovable property) now cl 30 33

34 15.6 IBRB (Aspects of administration of estate) Ch 9: Appointment of liquidator Abolish requisition system Policy Note: Qualifications Professional bodies Interim: Transformative policy 34

35 15.6 IBRB (Aspects of administration of estate) Ch 10: Powers and duties of liquidator Cl 38 liquidator to serve Liquidation order and to attach estate property Ch 11: Meetings and questioning Cl 46(1): Liquidator convene first meeting Resolutions at first meeting Cl 47A(1) Creditors Committee 35

36 8 IBRB (Aspects of administration of estate) Sale of assets: going concern cl 45 (continuation of business - loan) Ch 14: Rights and duties of creditors Cl 1: security Cl 79: Application of proceeds of security Notification 36

37 15.6 IBRB (Administration Notices and Participation) fax notices interested parties Already SARS, employees Creditor committees for unsecured creditors 37

38 15.7 IBRB (Distribution and Contributions in Liquidation) Ch 15: Cost of liquidation and application of free residue Cl 84: Application of free residue: General cost of liquidation Employees (directors excluded) - See s 135 of the Companies Act of 2008? Maintenance in arrear 3 months max R12000 Simple interest on above Other statutory claims 38

39 15.7 IBRB (Distribution and Contributions) Taxes in arrears General bond Concurrent claims Cl 99: (Still in IBRB but disagreement if system of contributions should be abolished) 39

40 15.8 IBRB (Rehabilitation, Contributories and personal liability) Ch 19: Rehabilitation of natural persons General norm of 4 years to apply exceptions Ch 21: Personal liability fraudulent, reckless or insolvent trading (extension s 424, 1973 Companies Act) 40

41 15.9 IBRB (Ch 22 Compositions) Cl 118: Pre-liquidation composition any other debtor than a company or close corp Administrator Debts below R Hearing Two thirds majority repayment plan Cl 119: Post liq comp: Debtor other than company or co-operative 2/3 majority [Administration orders and debt review?] 41

42 15.10 IBRB (Compromises, Rescue and CB) Ch 24: Rescue Track Chapter 6 of 2008 Companies Act Cl 121 Debtor carries on business more than 10 people employed, other than company or CC Ch 25 Offences Ch 26: Cross-border Insolvency (Incorporate Cross-Border Insolvency Act of 2000) 42

43 16 CONCLUSION Many provisions not that different from current Insolvency Act Natural persons: Courts to consider; Advantage principle: natural persons & partnerships NCA: Debt review concluded or serve no purpose Pre-liquidation composition Rehabilitation: discharge 43

44 16 CONCLUSION Corporate insolvency: Alignment especially Companies Act of 2008 RSA: when new Act? Namibia to decide what way to go? Southern Africa regional implications? 44