The Minister of Justice and Constitutional Development, Mr Jeff
Radebe, recently confirmed, in response to questions raised in the
National Assembly, that Government is in the process of regulating
the insolvency industry in South Africa.
The focus appears to be on determining Government policy for the
appointment of liquidators (Insolvency Practitioners) and the
effective management of the realization of assets which would
eventuate subsequent to a company going into liquidation. The
Minister stated that the intention was to "promote
consistency, fairness, transparency and the achievement of equality
for persons previously disadvantaged by unfair
discrimination". It has been suggested that a new
"Unified Insolvency Bill" is up for discussion and which
will result in a new act focused on all aspects of insolvency
involving individuals, partnerships, trusts and companies.
Additionally, new regulations will deal with admission and
accreditation requirements for the licensing of liquidators and the
establishment of a formal code of conduct for the insolvency
Liquidators are appointed subsequent to an application brought
for the winding up of a company, generally on the basis that such
company is unable to pay its debts. The High Court would, in
these circumstances, place a company under the administration of a
liquidator. Liquidators, once appointed, consult with
creditors, hold meetings of such creditors, receipt claims from
creditors for proof and realize assets with the intention of
maximising benefit for all stakeholders, including creditors and
The appointment of liquidators has always been in the hands of
the Master of the High Court run through various regional offices
situate throughout South Africa. What generally would happen
is that shortly prior to the liquidation of a company, requisitions
would be sent by competing liquidators for their appointment to the
company post the liquidation order. Such requisitions would
be distributed to creditors, in the hope that such creditors would
support the relevant liquidator chasing the appointment.
Over the years, the appointments of liquidators have been
criticised in the sense that from time to time claims that are
circumspect might be put before the Master in support of the
appointment of a liquidator, when in fact such claims do not
exist. What would transpire is that the liquidators might be
appointed on the back of invalid claims.
The recent comments made by the Minister, have been long
anticipated by the Insolvency industry and will be welcomed,
particularly by the banking fraternity in South Africa.
Regulation of appointments and specifically licensing liquidators
to practise under stringent admission requirements, will no doubt
boost the image of the industry within South Africa and would be
beneficial for the efficient regulation of the liquidation
The new Companies Act provides specifically for the appointment
of licensed Business Rescue Practitioners for companies who find
themselves in financial distress, well prior to the prospect of
liquidation. The Companies Amendment Bill, 2010 (19 July
2010) caters for the prospect of licensed Business Rescue
Practitioners being appointed from the legal, accounting or
business management professions that will be subject to regulation,
in due course. It is intended that the Minister will make
regulations (still to be published) prescribing the standards and
procedures to be followed in the carrying out of the licensing of
these Practitioners and the prescription of minimum qualifications
for Business Rescue Practitioners.
There is no doubt that the Minister is considering similar
provisions (as have already been provided in the new Companies Act)
for liquidators as well. The skill set of liquidators is very
different to that of a Business Rescue Practitioner. The
former are tasked with realizing assets at best possible value, but
in a forced/fire-sale situation, as opposed to the latter, who will
seek to maintain value in the company by filing a Business Rescue
plan enabling the company to trade its way out of its financial
All in all, it appears that Government are steadfast in their
intention to ensure that both liquidators and Business Rescue
Practitioners are enabled to provide the best possible returns for
all stakeholders by ensuring that distressed companies are properly
managed in both the liquidation and business rescue
scenarios. No doubt, good for the economy and for
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Globalisation and the rapid expansion of international trade has highlighted the need for uniform and consistent insolvency legislation across international markets. South Africa will take a further step towards such international best practice with the passing of the Judicial Matters Second Amendment Bill making provision for certain technical changes to Section 35B of the Insolvency Act.
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