COMMENCEMENT OF BUSINESS RESCUE PROCEEDINGS

A4_bIs 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)

WHAT HAPPENS AFTER YOUR HOUSE HAS BEEN BURNT TO THE GROUND?

A3_bThere are definite steps that a homeowner will need to take if he ever has the traumatic experience of having his house burnt to the ground.

Over and above all the emotional and financial tension it causes in a person and his family, there will be several steps that a homeowner will need to take before the problems accompanying such an experience will be resolved.

The first step that needs to be taken by the homeowner is to report the matter to the nearest police station. The reason for this is twofold. Firstly, by reporting the matter the homeowner will receive the necessary case number as required by most insurance companies. Secondly, the conduct of the third party may turn out to be a crime, for example, arson. Thereafter the complaint will be investigated by the police and handed over to the prosecuting authority that will decide if the third party should be prosecuted or not.

The second step is to report the matter to the insurance company together with the abovementioned case number. Thereafter the insurance company will investigate the claim and decide whether it is going to accept or reject the claim. The insurance policy will determine the ambit of the insurance company’s discretion in deciding whether to accept or reject the insured’s claim. The reason for this is that the insurance policy will determine the rights and obligations between the insurance company and the insured. If the insurance company decides to reject the insured’s claim the insured will have two further options at his disposal. The insured will be able to take the matter to the ombudsman for determination, or he may dispute the matter in a civil court based on breach of contract by the insurance company.

The third step will be to indemnify the insured if the claim is accepted by the insurance company. The amount that the insurance will pay out to the insured will once again be determined by the terms and conditions of the insurance policy. If the insurance company rejects the insured’s claim or if the insured decides not to claim from the insurance company, then the insured will be able to institute action against the third party if he can prove that the house was burned down as a result of the intentional or negligent conduct or omission by the third party or, alternatively, that the house was burned down as a result of a breach of a contractual obligation between the homeowner and the third party, had a contract been in place.

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)

CONSIDER YOUR CLAIM CAREFULLY: SOME OF THE NEED TO KNOW FACTS IN THE EVENT OF A THIRD PARTY CLAIM AGAINST THE RAF (ROAD ACCIDENT FUND)

A2_bThe Road Accident Fund (hereinafter referred to as the RAF) has over the years created the assurance that public road users will be covered in the event of any motor vehicle accident which caused either injuries or death, and for the losses suffered thereby, such as medical expenses, loss of earnings and even general damages (damages for pain and suffering).

Before the Road Accident Fund Amendment Act 19 of 2005, which came into operation on 1 August 2008, this had the effect of any person simply being able to institute a claim against the RAF in any event of an accident which amounted to damages suffered as a result of injury or death, or even a claim based on pain and suffering. This sounded simple enough, that is until the Road Accident Fund Amendment Act 19 of 2005 came into operation, placing two very important limitations on claims from the RAF.

The first limitation relates to claiming from the RAF and/or the wrongdoer. In respect of the old Road Accident Fund Act 56 of 1996, the victim who had a limited claim against the RAF, still had a common law claim against the wrongdoer in respect of the excess amount not compensated for by the RAF. This meant that should the road accident victim only be compensated by the RAF for a portion of the damages suffered during the accident, the remaining portion could still be claimed from the wrongdoer in his personal capacity. For example, if victim X suffered damages in the amount of R200 000 and the RAF only compensated the victim in the amount of R150 000, the remaining R50 000 could still be recovered from the wrongdoer in person. This would have the effect of two separate claims. However, should the victim have received full compensation in terms of Section 17 of Act 56 of 1996 for the amount of R200 000, such victim would not have another claim against the wrongdoer.

In terms of the new Road Accident Fund Amendment Act this common law right has been abolished by the institution of Section 21 of the Road Accident Fund Amendment Act. The victim will currently only be able to claim/recover losses or damages suffered as a result of a motor vehicle accident from the RAF. There can be no more separate claims in respect of one cause of action.

The second important amendment is a part of Section 21 which places a cap on the amount of loss of earnings claimed and the amount of general damages claimed, i.e. damages claimed for pain and suffering.

With regard to the capped amount allowed to claim for loss of earnings, a victim is only allowed to claim damages up to the amount of R160 000, but this amount changes quarterly according to the fluctuation in interest rates and currently it stands at R201 337 per annum as from October 2012. Should the victim earn a salary of more than the said amount per annum, he or she will be unable to institute such a claim against the RAF. / Should the victim earn a salary of more than the said amount per annum, his or her claim will be limited to the amount dictated by the Law.

Furthermore, with regard to a claim for damages based on injuries suffered, the claim will only succeed if the victim can prove that he/she has suffered “serious injuries” as defined in the Act. This would amount to injuries sustained which has ultimately rendered such victim at least 30% disabled in his or her everyday life. This limitation does not take into consideration any personal circumstances. Similarly, no common law right exists to institute a second claim against the wrongdoer in the event of failure against the RAF.

Also important to remember is the fact that when consideration is given to medical expenses suffered, the amount is calculated according to the rate charged at a public level (public hospital rates) and not at a private level (private hospital rates).

In conclusion, it is important to remember that the RAF takes over the liability of the wrongdoer in such accidents, meaning that actions must be instituted against the RAF and not the wrongdoer in the first instance. The exception is where the RAF is unable to pay compensation or where emotional shock is suffered. In such a case, the action may be instituted against the wrongdoer in person. Any action instituted against the RAF is a time-consuming process and requires due consideration before proceeding. Section 21 of the Road Accident Fund Amendment Act has definitely placed limitations on claims that need to be borne in mind.

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)

INFORMAL “DECISIONS” BY HOMEOWNERS’ ASSOCIATIONS

A1_bMany homeowners’ associations have strict requirements concerning the aesthetic appearance of buildings on the estate. These include fences and other smaller additions that are not always considered by the homeowner to be building projects in terms of the rules, the Memorandum of Association (MOA) or the Memorandum of Incorporation (MOI). The owners then fail to submit plans and/or drawings for formal approval by the trustees or directors of the association.

Some homeowners knowingly attempt to avoid the prescribed formal process and merely invite a trustee or director for an informal discussion, explaining with waving arms the envisaged building project, be it a fence or a pergola. The nod of approval by the trustee is then held by the homeowner to be “approval” of the planned project.

The courts have ruled as follows with regard to the “consent” granted by a trustee at an informal meeting with the homeowner, where the MOA or MOI of the homeowners’ association clearly dictates a procedure for approval of any building or improvement:

1. In order for a trustee or director to sign off a plan in his official capacity, a trustee must properly inform himself of the issues which affect the complex as a whole and not simply have regard to his or her inter-personal relationship with the homeowner. In order to be properly informed, a trustee must ordinarily make a decision in committee with the benefit of debate. His decision must consciously have regard to the MOA or the MOI, whichever case it may be, and the long-term interests of the members. Failure by the trustee to do so will imply that the trustee has not applied his mind to all the relevant issues. It may be possible to impute acceptance by a person both in his individual and official capacity.

2. The nature of the relationship established between homeowners under a MOA or MOI to which each subscribes, constitutes an agreement in terms of which each homeowner submits contractually to the decisions of a body of elected trustees to whom they have conferred the right and power to make binding decisions on matters that affect their relationship inter se, or which generally affect the estate.

3. It is further important to take note of whether written consent has been granted by the trustee, as such an action by the trustee would be an additional consideration to establish whether a formal decision will be deemed to have been made.

See specifically Hoosen & Others NNO v Deedat 1999 (4) SA 425 (SCA) and Khyber Rock Estate East Home Owners Association v 09 of Erf 823 Woodmead Ext 13 CC, a judgement by his honourable acting justice Spilg in the Witwatersrand Local Division in case number 7689/2006.

An informal discussion regarding the building plans of the homeowner can thus not be deemed as a formal decision made by the trustees of the homeowners’ association, if the homeowner failed to follow the prescribed procedure.

In the event that a homeowner indeed deems the informal consent as a “decision” made by the trustees of the homeowners’ association, the courts will not interfere with the decision made by a homeowners’ body save under recognised grounds of judicial review as applied to a voluntary association whose members have bound themselves to its rules, which include the conferring of decision-making functions on an elected body of trustees. (Turner v Jockey Club of South Africa 1974 (3) SA, SA Medical & Dental Council v McLoughlin 1948 (2) SA 355 (AD) and Marlin v Durban Turf Club & Others 1942 AD 112).

Trustees and directors should therefore take care when having informal discussions with homeowners and insist on the due process, in terms of the rules, the MOA or the MOI, to be followed to the letter. Rather avoid commenting or voicing an opinion except at the appropriate forum – the formal meeting of the trustees or directors where the item is noted on the agenda in compliance with the association’s prescribed formal requirements.

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)