Commencement of Business Rescue proceedings

Is 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.

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.

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Who are occupiers in terms of the EST act and why are they excluded from the ambit of the PIE act?

The Prevention of Illegal Eviction and Occupation of Land Act 19 of 1998 (“PIE Act”) provides, inter alia, the procedures for the eviction of unlawful occupiers. Section 1 of the PIE Act defines an “unlawful occupier” as someone who occupies land without the express or tacit consent of the owner or person in charge or without any other right in law to occupy such land. This definition expressly excludes a person who is an occupier in terms of the Extension of Security of Tenure Act 62 of 1997 (“EST Act”). Section 29 (2) of the EST Act states that the provisions of the PIE Act shall not apply to an occupier in respect of land which he is entitled to occupy in terms of this Act. Who are occupiers in terms of the EST Act and why are they excluded from the ambit of The PIE Act?

The EST Act has as its aim the provision of measures to facilitate long-term secured land tenure with state assistance. This Act grants occupiers the right to obtain a secured long-term right to occupancy with the permission of the owner, upon request on or after 4 February 1997.

Occupiers of rural land, farms and undeveloped land are specifically protected under this Act. The EST Act does not apply to, inter alia, occupiers living in already proclaimed township areas, land invaders, labour tenants and people using land for mining and industrial purposes and for commercial farming purposes. Occupiers in terms of the EST Act receive a secured right in law to live on and use the land they have been occupying, under permission, for continued periods of time. The occupier thus enjoys protection of this right and as a result such a secured right may not be unreasonably altered or cancelled by the owner or person in charge of the land without notice to, and the permission and/or consent of, the occupier. This includes protection against unfair or arbitrary eviction and, in fact, provides its own specific mechanisms for the eviction of long-term secured occupants, which must be followed.

Actions such as the removal of a right to occupancy, access to the land, water or electricity, denial of family or visitors on the said land and the prohibition of the use of the land for personal reasons are all forms of evictions in terms of the EST Act and are strictly regulated by this Act when applicable to occupiers classified under and granted rights in terms of this Act.

Many occupiers of land who do so with the proper and necessary consent and permission of the owner are not aware that they possess tenure rights to occupy such land on a long-term basis. Unless such an occupier commits a serious wrong or fails to honour any terms of the agreement with the owner, he/she may not be arbitrarily evicted in terms of any eviction process available to owners, including those available under the PIE Act. Such occupier’s rights are protected and regulated under the EST Act.

Bibliography:

1. Prevention of Illegal Eviction from and unlawful Occupation of Land Act 19 of 1998; www.sarflii.org/za/legis/consol_act/poiefauoola1998627/ (accessed 11 March 2016);

2. Extension of Security of Tenure Act 62 of 1997; www.justice.gov.za/lcc/docs/1997-062.pdf (accessed 11 March 2016);

3. People Against Suffering Oppression and Poverty, PASSOP, www.passop.co.za/your-rights/housing-rights-esta (accessed 11 March 2016).

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Die toepassing van die talem qualem-reël

Wanneer ‘n dader ‘n slagoffer skade aandoen, gebeur dit soms dat die slagoffer meer skade ly as wat ‘n mens sou verwag. Dit mag veroorsaak word deur die feit dat die slagoffer homself in spesifieke omstandighede bevind, wat daartoe lei dat die slagoffer as gevolg daarvan meer skade ly as die gemiddelde persoon. Sal hierdie ‘n aanvaarbare verweer wees vir die dader, of moet die omstandighede van die eiser geïgnoreer word?

 ‘n Voorbeeld van die bogenoemde geval is waar die eiser hom in so ‘n swak finansiële posisie bevind dat hy nie in staat is om sy skade te mitigeer nie.

Die saak van Smit v Abrahams 1994 (4) SA 158 (K) het oor hierdie kwessie gehandel en is steeds die voorste gesag met betrekking tot die bostaande vraagstuk. In die Smit-saak was die eiser betrokke in ‘n motorbotsing, waarin die voertuig wat hy besit het onherstelbaar beskadig is. Die eiser het nie net die markwaarde van die voertuig by die verweerder geëis nie, maar ook die koste vir die huur van ‘n voertuig vir ‘n 3 maande periode om te verseker dat hy kan voortgaan met sy besigheid. Die omvang van die eiser se skade was dus deels veroorsaak deur sy eie swak finansiële posisie, aangesien hy nie kon bekostig om ‘n vervangende motor te koop na die ongeluk nie. Hierdie tipe situasies word na verwys as sogenaamde eierskedelgevalle, waar die omstandighede van die eiser die omvang van sy skade beïnvloed. Oor die algemeen bepaal die talem qualem-reël, die regsbeginsel wat in hierdie gevalle toepaslik is, dat die verweerder nie die uitsonderlike kwesbaarheid van die eiser as ‘n verweer kan gebruik nie. Hierdie reël is gebaseer op die feit dat jy jou slagoffer vat soos wat jy hom kry.

In die hof se uitspraak word die eierskedel-vraagstuk bespreek as deel van die hof se ondersoek na juridiese kousaliteit. Daar word bevind dat daar nie ‘n rigiede benadering gevolg moet word wanneer die vraag oor juridiese kousaliteit beantwoord moet word nie, maar eerder ‘n soepel benadering. Hierdie soepel benadering moet gebaseer wees op redelikheid, billikheid en regverdigheid, en elke saak moet verhoor word gebaseer op sy eie feite. Die feit dat die eiser se skade deels deur sy eie finansiële kwesbaarheid veroorsaak is, is dus slegs een van die faktore wat in ag geneem moet word om te bepaal of die skade wat gely is verwant genoeg is aan die verweerder se handeling om dit aan hom toe te reken.

Daar word beslis dat, wanneer al die omstandighede in ag geneem word, die eiser wel geregtig was om ‘n vervangende motor te huur om hom in staat te stel om met sy besigheid voort te gaan en dat dit aan die kriteria van redelikheid, regverdigheid en billikheid voldoen. Aangesien die eiser nie na die ongeluk in ‘n finansiële posisie was om ‘n nuwe voertuig te koop nie, was dit as regverdig beskou dat die verweerder die koste moes dra vir die huur van ‘n vervangingsvoertuig.

In gevalle waar eierskedelgevalle beoordeel word, moet die hof beslis of dit billik en regverdig is om te beslis dat die skade wat gely is en spesifiek die omvang daarvan, veroorsaak was deur die verweerder se handeling.

Die talem qualem-reël, soos oorspronklik geformuleer, word dus nie direk toegepas in die Suid Afrikaanse reg nie. Die toepaslike regsbeginsel, naamlik dat die eiser se kwesbaarheid nie as ‘n aanvaarbare verweer beskou word nie, word as ‘n faktor oorweeg wanneer daar oor die element van kousaliteit beslis word.

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)

Right of a domestic worker to a Christmas bonus

Doris, a domestic worker, demands a Christmas bonus from her employer in the amount of R1 000. She has not yet been employed for longer than a year and as a result no prior agreements or expectations have been created in this regard. When Christi, her employer, informs Doris that she will not pay her a Christmas bonus … to the CCMA for unfair labour practices …

Doris is a domestic worker who has been working at a private residence in Durbanville for just under a year now. On 15 December 2015 Doris approaches her employer to demand a R1 000 Christmas bonus. Christi, Doris’s employer, is not in a financial position to offer Doris a Christmas bonus, let alone a bonus to the amount requested by Doris. Christi explains to Doris that she cannot pay her a bonus due to economic constraints but that next year they could revisit this conversation and see if things have improved. It would also be based on Doris’s performance during the year.

Doris gets very upset by this response and starts shouting at Christi, threatening to take her to the CCMA for unfair labour practices. Christi feels apprehensive and is uncertain as to her stance in law on this point, so she consults an attorney to advise her.

Upon obtaining legal advice Christi learns that labour law legislation provides no guidance on the question of bonuses. In the absence of a contractual term regulating bonuses, a previous arrangement or previous payments of a bonus Christi learns that it is up to her to decide whether she wants to pay Doris a bonus or not.

Due to a Christmas bonus being considered as gratuitous payment by an employer to an employee, it is a natural corollary that the employee is granted same in exchange for a job well done, or for exceptional service which reaches beyond the call of duty in the year that has passed. This warrants a reward or tip over and above the normal agreed upon wage for services rendered.

Things Christi was advised to consider when making such a decision were inter alia Doris’s performance in the past year and Christi’s own financial position. She should also keep in mind that, should she decide to pay what Doris has demanded, a reasonable expectation may be created in the years to come for Christi to continue to pay such a bonus.

Doris does not have an all-encompassing right to receive a Christmas bonus. Further, due to the fact that no reasonable expectation has yet been created, Christi’s reasons for and decision not to pay Doris a bonus cannot be seen as an unfair labour practice. Thus providing Doris, in this particular case, no grounds on which to approach the CCMA to claim performance from Christi.

Bibliography:

1. http://www.labourguide.co.za/conditions-of-employment/149-the-payment-of-bonuses-re-visited (Accessed: 10/12/2015)

2. www.labour.gov.za/DOL/downloads/…of…/domesticworker2012.pdf (Accessed: 10/12/2015)

3. http://www.mywage.co.za/main/news/mywage-south_african-news/christmas-bonus-time-december-2010 (Accessed: 10/12/2015)

4. Basic Conditions of Employment Act and Amendments

5. Labour Relations Act

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)