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A cession of rights as security may include rights which only come into existence in future as in the cession of future book debts. The agreement to cede such rights requires no further action on the part of the cedent at the future time when those rights come into existence. They automatically form part of the rights ceded under that cession. In BP Southern Africa v Intertrans Oil SA, a company in business rescue…
The powers of a business rescue practitioner to suspend contracts has given rise to concern and speculation as to the effect of the exercise of those rights in business rescue and the implications for creditors. It has been clarified that a creditor whose agreement is suspended in business rescue has the right to withhold the reciprocal services or goods to be delivered under that agreement. In BP Southern Africa v Intertrans Oil SA, the Gauteng…
An owner whose property is in the possession of another without consent can recover possession by way of vindication (rei vindicatio). But what happens if the person in possession is legally permitted to sell those goods? In EnergyDrive Systems (Pty) Ltd v Tin Can Man (Pty) Ltd the Johannesburg High Court heard a matter dealing with the sale of leased movable assets in the possession of a lessee which was in business rescue. The lessee’s…
The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) is an independent Islamic international non-profit body that prepares accounting, auditing, governance, ethics and Shariah standards for Islamic financial institutions and the industry. AAOIFI is respected in the industry and their governance standards are used by many firms globally. The AAOIFI central Shariah board has published a new draft governance standard for comment. The aim of the standard is to ‘provide guidance to Islamic…
Overturning a lower court judgment, the appeal court has found that arbitrations are included in the general moratorium on legal proceedings against companies under business rescue in section 133(1) of the Companies Act 2008. In Chetty v Hart, the Supreme Court of Appeal looked at the meaning of the phrase “legal proceedings” in section 133 in relation to the language and design of the statute as a whole and its purpose. The obvious purpose of placing…
If prospects of success of business rescue exist a court will allow business rescue to commence even if the company is in final liquidation. In Richter v Absa Bank Limited, the Supreme Court of Appeal pointed out that business rescue protects interests of a wider group of people than liquidation and interpreted the Companies Act as elevating the role of companies as a means of achieving economic and social benefits. Therefore if in liquidation…
A failure to comply with the business rescue procedure timelines in Section 129(3) does not terminate the business rescue proceedings. Only a court can terminate those proceedings. This does not however mean that the time periods should be ignored. To avoid any court challenges the time periods stipulated must be complied with. Business rescue is commenced by way of a board resolution or by a court order. After passing a board resolution certain procedures need…
Islamic finance transactions are governed by Shariah law. These cater for Islam’s prohibition on charging interest. A court will however apply default interest to such a debt when the debtor has failed to perform a contractual payment obligation under such agreement. The Supreme Court of Appeal in Lodhi 5 Properties Investments v FirstRand Bank Limited dealt with various claims in relation to the default under an Islamic finance transaction between the bank and its customer.…
The moratorium on legal proceedings against a company in business rescue offers critical breathing space to the company from its creditors, allowing the business rescue practitioner the opportunity to investigate affairs of the company and develop the business rescue plan for its restructure. A recent case offers a useful interpretation of the extent and implications of this moratorium. It decided that cancellation of a contract is not enforcement action. In Cloete Murray NO & Another vs
Without deciding the point, the Supreme Court of Appeal in New Port Finance Company (Pty) Ltd v Nedbank Limited held that the decision in Tuning Fork (Pty) Limited v Greeff may not be correct in saying that where the principal debts are diminished or expunged by a business rescue plan the sureties are released accordingly. Section 154 of the Companies Act is capable of the construction that it deals only with the ability to sue the…