Thirdly, I would also like to acknowledge my family (specifically my mother), my wife and fellow brothers for the encouraging words and continued support; it is my pleasure to have them in my life. DTI 'Policy Document: South African Company law for the 21st Century Guidelines for Corporate Law Reform' (2004).
THEORIES OF CORPORATE GOVERNANCE AND THEIR
RE- ENACTED CREDITOR-PROTECTIVE MECHANISMS 42
THE INNOVATIVE STATUTORILY ADOPTED CREDITOR-
BUSINESS RESCUE CONCEPT AND CREDITOR PROTECTION 86
THE PIERCING OF THE CORPORATE VEIL AND CREDITOR
CONCLUSIONS AND RECOMMENDATIONS 112
PROBLEM STATEMENT
Creditors, like shareholders, have a financial interest in the company and therefore their interests should be treated in the same way as those of shareholders. For example, when the company becomes insolvent, directors may dispose of the company's assets in order to unjustly enrich themselves.
AIM AND OBJECTIVES OF THE STUDY 1. Aim
- Objectives
The extent to which these mandatory rules or mechanisms or measures introduced by the 2008 Act provide relief to the creditors was therefore the subject of investigation in this research work. The researcher examined whether the protection provided by the creditors under the 2008 Act is effective and sufficient.
RESEARCH QUESTIONS
HYPOTHESIS
SIGNIFICANCE OF THE RESEARCH
The researcher further suggested possible reforms and development of the law on commercial companies for better protection of creditors. To sum up, this research is imperative in that it aims at the possible reformation and development of South African corporate laws vis-à-vis creditor protection.
SCOPE OF STUDY
Given that the 2008 law came into force in 2011, many have already looked at this field of study from different angles; the researcher therefore intended to contribute to what already existed. This research work differs from other research works in that it did not investigate creditor protection from a general perspective, but separately examined different creditor protection mechanisms to determine their contribution to the overall effectiveness of creditor protection under the 2008 Act.
PRELIMINARY LITERATURE REVIEW
26 For a description of Turquand's rule in paragraph 1.10.13, see the definition section below. 28 For a description of the doctrine of constructive notice in paragraph 1.10.6, see the definition section below.
RESEARCH METHODOLOGY
This study therefore builds on the various claims made so far by various authors referred to in this literature review. Finally, the prescriptive technique was used to suggest recommendations for the development of creditor protection laws or for possible amendments to address shortcomings identified in South African company law as far as corporate creditor protection is concerned.
DEFINITION OF KEY WORDS/ CONCEPTS 1. Business rescue
- Company
- Creditor
- Creditor Protective mechanisms
- Creditor Compromises
- Corporate Constituencies or stakeholders
- Directors
- Doctrine of constructive notice
- Enforcement mechanisms
- Liquidation
- Piercing the corporate veil
- Solvency and Liquidity test
- Shareholder
This includes the establishment of the Enterprise Court, the Enterprise Committee, the Takeover Rules Panel. For the purposes of the 2008 Act, ''Corporate Court'' means the Corporate Court established in accordance with section 193.
ETHICAL CONSIDERATIONS
The Turquand Rule states that it is permissible for a third party contracting with a company to assume that such internal procedures have been followed. If such internal procedures have not been followed and the person entering into the contract on behalf of the company does not actually have the authority to do so, such contract is called a lame contract and is enforceable and voidable. at the request of a third party.50.
LIMITATIONS OF THE STUDY
STRUCTURE (OVERVIEW OF CHAPTERS) 1. Chapter 1: Introduction
- Chapter 2: Theoretical Basis for Creditor Protection
- Chapter 3: Re-enacted Creditor-Protective Mechanisms
- Chapter 4: The Innovative Statutorily Adopted Creditor-Protective Mechanisms This chapter deals with Statutorily Adopted creditor-protective mechanisms as provided for
- Chapter Five: Conclusions and Recommendations
This chapter justifies creditor protection by examining issues related to creditor protection in addition to creditor protection mechanisms. This chapter deals with creditor protection mechanisms which were previously used by the 1973 Act and which have been re-created by the 2008 Act.
CONCLUSION
This chapter looks at other legal systems as far as creditor protection is concerned, such as English law where most of SA's corporate law is based. It is therefore a comparative investigation that determines whether the respective creditor protection mechanisms have been improved and/or developed to provide effective creditor protection.
INTRODUCTION
EFFECTS OF INCORPORATION OF A COMPANY ON CREDITOR PROTECTION 1 Separate legal existence
- Limited liability principle
- Other consequences of incorporation of a company
Another consequence of establishing a company is the claim that the company's property and assets belong to the company itself and not to its members. The establishment of a company also means that a company's profits belong to the company itself and not to its members.
SCHOOLS OF THOUGHTS UNDERLYING THEORIES OF CORPORATE GOVERNANCE
- Contractarianism
- Communitarianism
- Dual-Concessionarism
- Associativism
This mindset is the opposite of contractarianism which values the rights of the company's shareholders first and foremost. However, communitarianism has its arms wide open to protect all corporate stakeholders.
THEORIES OF CORPORATE GOVERNANCE AND THEIR EFFECTS ON PROTECTION OF CREDITORS` INTERESTS
- Shareholder value approach
- Pluralist approach
It is therefore the board members' discretion to act within the framework of what they believe is in the company's best interests. Significantly, the King reports are attaching a preferred meaning to 'the best of the company'. In the premises, it can be argued that the 2008 Act has extended the meaning of 'the best interests of the company' to include not only shareholders but also other stakeholders.
CONCLUSION
2008, which reflect the expansion of the company's goals to satisfy the interests of other stakeholders, such as creditors.147. This suggests the inclusion of non-shareholder constituencies in the phrase "the best interests of the company". One of the findings was that contract law is not actually sufficient to protect the interests of creditors.
SOLVENCY AND LIQUIDITY TEST CONCEPT 1 Scope and meaning of this concept
- Historical background to the Solvency and Liquidity test concept
- The 2008 Act and the solvency and liquidity test concept
- Financial assistance versus creditor protection
- Creditor protection during a malgamations or mergers & other fundamental transactions
- A summary to the solvency and liquidity test concept
Also, Section 4 of the 2008 Act is not that helpful on how the solvency and liquidity test should be conducted. As said before, before the concept of the solvency and liquidity test, directors could not be allowed to declare dividends from the company's capital. The researcher applauds the importance of the solvency and liquidity test, which cannot be overemphasized.
SANCTIONING OF DIRECTORS/ DIRECTORS` LIABILITY
- Actions/ or omissions where directors may be held liable
- Summary on director liability
This is in the best interests of the company and certain stakeholders and creditors who are central to this research. Some directors falsify the company's financial statements in order to convince creditors that they can afford the loan facility. Courts must look beyond the corporate veil and impose liability on a director who engages blindly.
LIQUIDATION/ WINDING UP VERSUS CREDITOR PROTECTION
- Winding up of solvent Companies
- Voluntary Winding up of solvent Companies
- Winding up of solvent Companies by court order
- Winding up of insolvent companies
- Summary on the liquidation mechanism
Thus, a commercially solvent company (whether factually solvent or insolvent) can only be wound up under the 2008 Act; a solvent company cannot be wound up under the 1973 Act. As mentioned above, winding up of insolvent companies is still subject to the relevant provisions of the 1973 Companies Act. It has been proven to the court's satisfaction that the company is unable to pay its debts.
COMPROMISES WITH CREDITORS VERSUS CREDITOR PROTECTION
- Enforcement of creditor rights during compromise procedures
- Summary to creditor compromises
It has already been mentioned above that the researcher believes that the 2008 law made useful changes to promote the interests of creditors as far as the liquidation of solvent companies is concerned. The liability of the company representatives who are guilty of personal liability for the debts or other obligations of a company within the meaning of Section 424(1) is an additional liability to the company's own debts or other obligations and cannot be waived without it. exist.328. Section 155 of the 2008 Act clearly spells out what should be included in a compromise proposal to help the creditor(s) make an informed decision on whether or not to accept a compromise.
CONCLUSION
The researcher seeks to examine the effectiveness of these mechanisms in providing creditor protection in corporate relationships. These mechanisms need to be briefly discussed to assess their importance in promoting creditor protection in corporate relationships. Each of these must therefore be briefly discussed below in order to assess their individual and overall importance for the advancement of creditor interests in corporate relationships.
BUSINESS RESCUE CONCEPT AND CREDITOR PROTECTION 1. Introduction and background
- Business rescue under the 2008 Act
- Voluntary resolution of the board
- Application by an affected person
- Enforcement of creditor rights during rescue processes
- Summary to the business rescue concept
The essence of a business rescue is to put the company back on its feet so that it can fulfill its purpose. As already mentioned, the company rescue process is aimed at protecting the interests of creditors. A properly designed corporate resolution plan would help in resolving the company for the benefit of the company and its creditors.
- The 2008 Act`s Turquand rule vis-à-vis protection of creditors
- Summary on the Turquand rule
The Turquand Rule is first introduced into South African law by Section 20(7) read in conjunction with Section 20(8) of the 2008 Act. Section 20(8) was thus added to make an argument conclude that s 20(7) had inadvertently revoked part of the Turquand rule. The repeal of the constructive notice doctrine in favor of the Turquand rule is good news for creditors doing business with companies.
THE PIERCING OF THE CORPORATE VEIL AND CREDITOR PROTECTION 1 Introduction
- Piercing the veil under the 2008 Act vis-à-vis creditor protection
- Summary on Piercing of the corporate veil
It is the use of the word "may" that indicates that the courts have discretion as to whether or not to pierce the corporate veil. In attempting to define the meaning of unconscionable abuse above, it is important to consider the applicability of the provisions of the 2008 Act. It will ask the court to weigh separate legal personality against the principles favoring the piercing of the corporate veil, as stated in the Gore case, where the judge stated as follows;.
ENFORCEMENT MECHANISMS OPEN TO CREDITORS
Directors are under an obligation to act in the best interests of the company, which may involve ensuring that the interests of all company interest groups are reasonably balanced. A director who breaches his fiduciary duties can be held personally liable in terms of section 20(9) of the 2008 Act as long as an interested person is able to prove that the breach amounts to an unconscionable misuse of the legal personality of the company . This will help enforce compliance with its orders or parties' decisions in terms of the court's rules.
CONCLUSION
These broad provisions are new to company law as they were not part of the 1973 Act. Moreso, the extension of legal action to various stakeholders, including allowing the Corporations Commission to act on behalf of or intervene in legal proceedings where it is of the opinion that adequate compensation cannot be obtained without its intervention. After intensive application of the doctrinal approach to this research, a number of conclusions and recommendations were respectively drawn and advanced.
CONCLUSIONS
The 2008 Act provides in section 76(3)(a) that directors must act in the best interest of the company. 492 See the preamble to the 2008 Act which aims to provide appropriate remedies to third party creditors. This provides certainty about the procedure and application of the solvency and liquidity test.
RECOMMENDATIONS FOR FUTURE RESEARCH
Capitalization of Shares, available at https://en.m.wikipedia.org/wiki/Capitalisation-shares (accessible through the CIPC 'The Solvency and Liquidity test' available at http://www.cipc.co.za/ index .php/manage-your-business/manage-your-company/solvency-and-liquidity-test (Retrieved from. Tomlinson Mnquni James Attorneys 'Solvency and Liquidity' Law talk: Newsletter (2011) Available at http://www . tmj.co.za (accessed at .
