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Month: April 2016

COMMENCEMENT OF BUSINESS RESCUE PROCEEDINGS

COMMENCEMENT OF BUSINESS RESCUE PROCEEDINGS

A3Is your company experiencing financial strain? Are creditors breathing down your neck? Business Rescue proceedings may be a solution to your problems.

Business Rescue is a new approach that is governed by the Companies Act 71 of 2008 (“the new Companies Act”) with the aim of assisting companies which are experiencing financial strain and are unable to pay their creditors in the ordinary course of business. This article will look at what Business Rescue encompasses, as well as how Business Rescue proceedings are commenced.

Section 128(1) (b) of the Companies Act defines Business Rescue proceedings as proceedings to facilitate the rehabilitation of a company that is financially distressed by providing, inter alia, temporary supervision of a company under a Business Rescue practitioner.

The role of the Business Rescue practitioner (who must be appointed within 5 days after the company has been placed under Business Rescue) is to ensure that the company complies fully with the steps to be taken once Business Rescue proceedings have commenced. They must also ensure that everything reasonably possible is being done (including the drafting of a Business Rescue plan) to assist the company in getting out of its current state of financial strain and into a position where it will be able to pay its creditors in the ordinary course of business.

The new Companies Act stipulates that, in order to place a company under Business Rescue, a resolution must be taken by the Board of Directors and an application thereto must be made to the CIPC (Companies and Intellectual Property Commission). The Commissioner must then consider the application and approve or reject it. Alternatively, any interested or affected party may apply to the Court for a court order placing the company under Business Rescue.

A company that is under Business Rescue is protected from creditors in that no legal action or proceedings may be taken against a company that has commenced with Business Rescue proceedings.

It is imperative to note that a lack of full compliance with the requirements in respect of Business Rescue proceedings may render the Business Rescue proceedings null and void. This position was reiterated in the High Court case of Advanced Technologies & Engineering Company (Pty) Ltd v Aeronautique et Technologies Embarquees SAS (unreported CASE NO 72522/20110), and the Court further held that the new Companies Act does not provide for condonation of non-compliance with the requirements.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your attorney for specific and detailed advice. Errors and omissions excepted. (E&OE)

References:

  • Companies Act 71 of 2008
  • D Davis, W Geach, T Mongalo, D Butler, A Loubser, L Coetzee, D Burdette, 3rd Edition (2013) Commercial law: Companies and other Business Structures in South Africa.
WHEN DOES A CLAIM PRESCRIBE?

WHEN DOES A CLAIM PRESCRIBE?

A2The issue of the legal nature of a vindicatory claim and whether it gives rise to a debt that is subject to the three year extinctive prescription period has been decided differently by different divisions of the High Court. On 28 May 2015 the Supreme Court of Appeal came to a final decision in Absa Bank v Keet[1] as to whether claims under the actio rei vindicatio prescribe after 3 years or not.

One of the first questions that your attorney will ask you when you consult him is when your cause of action arose so that they can ascertain whether your claim has prescribed. If your claim is prescribed, it means that you no longer have any legal remedies available to you. Claims arising from a debt prescribe after three years and the rules of prescription are set out in the Prescription Act, 1969.

There is one specific claim where the application of the 3 year prescription period was uncertain and this was in regard to claims under the actio rei vindicatio. This is a legal action by which the plaintiff demands that the defendant return a thing that belongs to the plaintiff, and it may only be used when the plaintiff owns the thing and the defendant is impeding the plaintiff’s possession of the thing.

A rei vindicatio action is often used in disputes surrounding instalment sales where ownership only passes on the payment of a last instalment or where instalments are not duly paid. This is mostly coupled with a claim for cancellation. In other words, the seller cancels the sale agreement and claims return of the thing sold.

In the case of Absa Bank v Keet[2] the seller of a motor vehicle attempted to cancel the sale agreement and to claim the return of the vehicle sold. The purchaser of the vehicle responded to this claim with a special plea stating that the claim for the return of the vehicle had prescribed.

The reason for stating that the claim had prescribed was that the agreement on which the seller sued would have come to an end on the date on which he contended the amount outstanding became due and payable, and that it was more than 3 years since that amount became due.

In the case of Staegemann v Langenhoven[3] it was held that a vindicatory claim does not prescribe after three years. The High Court in the Keet case held that this case was wrongly decided because if Staegemann were correct, ‘the Bank could withhold its demand for the tractor for another decade or even longer, and then demand return of the vehicle so that it could calculate its damages’.

The Supreme Court of Appeal (SCA) in the Keet case had to decide whether the High Court was correct in holding that the seller’s claim for the repossession of its vehicle is a ‘debt’, which for the purposes of the Prescription Act prescribes after three years.

The SCA made an important distinction between extinctive prescription and acquisitive prescription to come to its final decision. Extinctive prescription deals with a creditor’s right of action against a debtor, which is a personal right. On the other hand, acquisitive prescription deals with acquiring real rights to property (in terms of the Prescription Act a person can acquire ownership of property after 30 years of uninterrupted possession). Real rights are primarily concerned with the relationship between a person and a thing and personal rights are concerned with a relationship between two persons.

The person who is entitled to a real right over a thing can, by way of vindicatory action, claim that thing from any individual who interferes with his right. Such a right is the right of ownership. If, however, the right is not an absolute, but a relative right to a thing, so that it can only be enforced against a determined individual or a class of individuals, then it is a personal right.[4]

The Supreme Court of Appeal is therefore of the opinion that to consider a vindicatory action as a ‘debt’ which prescribes after three years is contrary to the scheme of the Act and that this would undermine the significance of the distinction which the Prescription Act draws between extinctive prescription and acquisitive prescription. In other words, what the creditor loses as a result of operation of extinctive prescription is his right of action against the debtor, which is a personal right. The creditor does not lose a right to a thing.

The SCA has therefore made it clear that to equate the vindicatory action with a ‘debt’ has the unintended and absurd consequence in that by way of extinctive prescription the debtor acquires ownership of a creditor’s property after three years instead of 30 years. The vindicatory action therefore does not prescribe after three years.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your attorney for specific and detailed advice. Errors and omissions excepted. (E&OE)

[1] (817/13) [2015]  ZASCA 81 (28 May 2015)

[2] (817/13) [2015] ZASCA 81 (28 May 2015)

[3] Staegemann v Langenhoven & others 2011 (5) SA 648 (WCC).

[4] Wessels Law of Contract in South Africa 2 ed vol 1 p 3-4.

RODE ONTBYT: 13 APRIL 2016

RODE ONTBYT: 13 APRIL 2016

A1_newMHI Prokureurs het onlangs saam met C2M Geoktrooieerde Rekenmeesters Ing en in samewerking met die Sake Burger, die Rode-sakeontbyt by D’Aria in Durbanville aangebied.

Plaaslike besigheidslui word jaarliks uitgenooi om die gesogte ontbyt by te woon, waar die effek van die land se ekonomie op die plaaslike (Wes-Kaapse) en nasionale eiendomsmark, vergelyk en bespreek word.

Een van die hoofsprekers by vanjaar se ontbyt was Erwin Rode, bestuurshoof van Rhode & Genote, en ook ‘n eiendomsekonoom, professionele waardeerder en uitgewer & hoofredakteur van ‘n portefeulje eiendomsnavorsingspublikasies.

Alhoewel Rode nie nasionale ekonomiese groeigeleenthede in die eiendomsektor vir die nabye toekoms voorspel nie, veroorsaak migrasie vanuit ander provinsies na die Wes-Kaap dat lg provinsie kan spog met betreklike hoë huispryse in vergelyking met die res van Suid-Afrika.  Dit is waarskynlik ook een van die redes waarom residensiële huurgeld in Kaapstad @ 9.6% groei teenoor ‘n persentasie van 6% of minder in ander stede.  Eiendomsontwikkelaars in die Wes-Kaap is aangemoedig om wel geleenthede te benut indien geskikte persele geïdentifiseer kan word, en beskikbaar is vir hierdie doel.

Dawie Roodt, stigterslid, direkteur en hoofekonoom van die Efficient Groep was ook ‘n spreker wat ons kliënte toegespreek het, en het onder andere opgemerk dat ‘n geldmarkbelegging tans jou swakste vorm van belegging is gegewe die huidige 4 bateklasse, nl aandele, effekte, geldmark en eiendom.   Hy was verder van die opinie dat ‘n belegging in Amerikaanse en Europese aandele tans beter waarde bied as Suid-Afrikaanse aandele, en voorspel hy dat ‘n beurskorreksie ‘n realistiese moontlikheid is.

Roodt het verder die noodsaaklikheid van groei wat moet plaasvind in groot maatskappye beklemtoon as ‘n voorvereiste vir nasionale ekonomiese groei en die skep van welvaart.

MHI Prokureurs is voorwaar trots om jaarliks met hierdie geleentheid geassosieer te word, en om waarde te kan toevoeg tot die besighede en toekomsplanne van ons uitgebreide kliëntebasis, wat meestal uit eiendomsontwikkelaars en ander rolspelers in die eiendomsbedryf, bestaan.

Hierdie is ‘n algemene inligtingstuk en moet gevolglik nie as regs- of ander professionele advies benut word nie. Geen aanspreeklikheid kan aanvaar word vir enige foute of weglatings of enige skade of verlies wat volg uit die gebruik van enige inligting hierin vervat nie. Kontak altyd u regsadviseur vir spesifieke en toegepaste advies. (E&OE)