Abstract:
The notion of special insolvency rules for small and medium-sized enterprises
(SMEs) has attracted attention in international spheres, and within the ambit of
some international and comparative approaches, same is considered in this article
with particular focus on the South African position. In particular, we show that the
South African insolvency regime does not, at present, cater for financially distressed
small businesses in a specific and viable manner. In South Africa, although
attention has been paid to the development and support of small businesses, similar
considerations have not been observed with regard to the insolvency side of small
business concerns. No comprehensive and focused process of dealing with financially
distressed small businesses exists in the South African insolvency framework.
This scenario prevails, notwithstanding that there are existing foreign and international
policy guidelines, rules and regimes in developed jurisdictions that can serve
as pointers in this regard. The purpose of this article is to first highlight the need
for special treatment of small businesses by focusing on the shortcomings in the
South African system, and, as a natural sequential development, policy proposals
as unavoidable foundations to address these shortcomings. In the premises, the focus
is on the principles and policies that are relevant to any discussion regarding
insolvent businesses that fall within the scope of the SME category. Therefore, this
paper deals with the concept of the small business, the South African insolvency
regime and the international position pertaining to small businesses. In particular, the need for special treatment of SMEs under insolvent circumstances is discussed,
consideration is given to the existing South African mechanisms available to small
businesses in distress and the lack of suitable contextual provisions for small businesses
in distress is noted. A core component of this article is the position in South
Africa viewed against the backdrop of some international developments, international
documents and principles that are relevant to an insolvency and rescue/rehabilitation
regime within the context of the small business. As a logical conclusion,
recommendations for reform of the South African regime are made.
