On 20 May 2015, the Supreme Court of Appeal (SCA) delivered judgment in the matter of African Banking Corporation of Botswana v Kariba Furniture Manufacturers & others(228/2014) [2015] ZASCA 69, dealing, amongst other things, decisively with the proper interpretation of the words 'binding offer' as they appear in s153(1)(b)(ii) of the Companies Act, 71 of 2008 (Act).
Section 134 of Act 71 of 2008 is extremely important because it is there to protect the interests of both the company in business rescue and the creditors and other third parties related to the company.
On 20 May 2015, the Supreme Court of Appeal (in the matter of African Banking Corporation of Botswana v Kariba Furniture Manufacturers & Others) clarified one of the biggest uncertainties arising out of the business rescue provisions of the Companies Act. The Court has now clarified the meaning of the term “binding offer” in a manner which not only brings clarity to the business rescue regime in general, but also will provide greater comfort to banks and other creditors.
In terms of Section 153 (1)(b)(ii) of the Companies Act, a creditor who votes against the adoption of a business rescue plan runs the risk of having their claim purchased by another party at a value of what the creditor would have received on liquidation of the company. In the terms of the bankruptcy laws of the United States of America this procedure is referred to as a "cram down" which is imposed on creditors in business rescue situations.
The South African Revenue Service (SARS) published Binding Private Ruling No. 198 on 7 July 2015 (Ruling). The Ruling deals with the distribution by a South African resident company (Subsidiary) of its loan account to its South African holding company (Holding Company) in anticipation of the Subsidiary’s deregistration.
The applicable provisions in the Income Tax Act, No 58 of 1962 (Act) are s10(1)(k), s47, s64D and s64FA(1)(b).
The relevant facts relating to the Ruling are as follows:
The Business rescue process as set out in Chapter 6 of the 2008 Companies Act (operative since 2011) has opened up new and creative opportunities to resolve complex and protracted shareholders’ disputes.
On 2 September 2014 the Constitutional Court heard an appeal against a final order of sequestration granted by the High Court of South Africa (Western Cape High Court) on 14 August 2013 sequestrating the joint estate of Mr Ivor Charles Stratford, the former chairman of the Pinnacle Point Group, and his wife Mrs Sheila Margaret Stratford (the Stratfords).
The advent of the new Companies Act 71 of 2008 (the Act) brought with it a shift from a creditor-protectionist society towards a business rescue model that is debtor-protectionist. In consequence, there has been a swarm of applications taking advantage and exploiting this new scheme. This shift has unfortunately led to considerable abuse of the business rescue procedure.
A party with a statutory right to an admiralty claim in rem, which had issued its claim after the Admiralty court had ordered the sale of a vessel, did not lose its right to enforce the claim1. The claim in rem could be enforced against the sale proceeds provided that the person liable in personam was the beneficial owner of the sale proceeds.
Facts
The in duplum rule is a common law rule that provides that arrear interest ceases to accrue once the sum of the unpaid (accrued) interest equals the amount of capital outstanding at the time (and not the amount of capital originally advanced). "In duplum" directly translates to "double the amount".