A framework for corporate insolvency law reform in South Africa

Abstract

South Africa has a dualistic system of insolvency law, which means that individual and corporate insolvency is dealt with in separate statutes. The purpose of this study is to propose a framework for corporate insolvency law reform, with a view to introducing a single insolvency statute in South Africa. In determining the reasons for the separate development of individual and corporate insolvency in South Africa, research is conducted into the historical development of both individual and corporate insolvency law. Although corporate insolvency is supplemented by the substantive rules of individual insolvency, the existence of separate statutes regulating individual and corporate insolvency has resulted in the separate development, and resultant fragmentation, of South African insolvency law. In determining why some countries have been more successful than others in introducing a unified insolvency statute, a brief comparative study is undertaken in respect of the insolvency regimes that apply in England, Australia, Germany and the United States. Research is then conducted into the possibility of introducing a unified insolvency statute in South Africa. Having determined that the underlying problem of a dualistic system is the fragmentation of the regulatory statutes, the remainder of the thesis is devoted to making proposals for the introduction of a unified statute. In proposing a unified insolvency statute the following critical issues are addressed: the definition of "debtor" for the purposes of a unified statute; whether a unified statute should also address the liquidation of specialised institutions such as banks; liquidation applications; the commencement of liquidation; the vesting of the insolvent estate; whether ancillary matters such as alternatives to liquidation, insolvent deceased estates, business rescue provisions, compromises, personal liability provisions and cross-border insolvencies should be included in such a statute; and revised provisions in regard to voluntary liquidations by resolution. The conclusion that is reached, is that it is in fact possible to substantially unify all the provisions relating to individual and corporate insolvency law in South Africa into a single statute. This conclusion is reached by means of a draft Insolvency and Business Recovery Bill, and is included as part of the conclusion to the thesis.