The Regulation of Reckless Trading in South African Company Law

Abstract

This dissertation will investigate the various rules and regulations pertaining to reckless trading within the South African Company Law context.

For purposes of this dissertation, I will investigate provisions regulating reckless trading at the hands of the Companies Act, 1973 (hereinafter referred to as the “1973 Act"). I will also investigate the position as set out in the Companies Act, 2008 (hereinafter referred to as the “2008 Act”) and will have a brief look at whether the Companies Amendment Bill, 2021 may change the provisions in terms of reckless trading, both in wording and in application. I will critically analyse and compare the provisions of the 1973 Act and the 2008 Act in so far as reckless trading is concerned.

The 1973 Act largely deals with reckless trading in terms of section 424 of the Act. This provision sets out instances in which the section will find application. It Further determines when affected parties (i.e. creditors) can rely on the Act.

The 2008 Act similarly contains provisions regarding reckless trading, however, the provisions differ in wording and are applicable in different scenarios than the 1973 Act.

This dissertation seeks to set out the scope and application of the 1973 Act and the 2008 Act. Further, whether, with the promulgation of the 2008 Act, the 1973 Act’s provisions still find applicability. I will set out remedies available in terms of the governing legislation read together with the Common law and investigate the provisions of the 1973 and 2008 Acts respectively to see who can call upon them for protection against reckless trading.

Furthermore, I will investigate conflicts between both Acts concerning wording and application and whether the Companies Amendment Bill, 2021 will change the current position. The Companies Amendment Bill will be investigated in particular to see whether it clarifies the conflicting positions regarding the regulation of reckless trading in the 1973 and 2008 Acts as well as prevailing case law.

I have followed a comparative approach to the research and have focussed almost exclusively on South Africa’s legislative landscape.