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.

It is common practice to find directors of a company standing surety for the company in order to secure its debts. The consequence could be severe for the sureties, because if the company is unable to pay its debt, the creditor can take legal action against the directors or other third parties in their capacity as sureties, unless the company pays its debts and the sureties are released from liability.

Interim costs awards in arbitration proceedings are not often the precursors to winding up applications. However, it may happen that if such an award of costs is not paid, the possibility of winding up the non-paying party may arise. This possibility leads to the following question, "Is a bill of costs drafted pursuant to an arbitration award and taxed by the taxing master of the High Court a "debt" for purposes of section 345 of the Companies Act 61 of 1973?"

One of the first cases involving the operation of section 153(1)(a)(ii) of the Companies Act 71  of 2008 is the matter of Copper Sunset Trading 220 (Pty) Ltd t/a Build It Lephalale (In Business Rescue) and Spar Group Limited (First Respondent) and Normandien Farms (Pty) Ltd (Second Respondent).  This matter was decided under case 365/2014 in the High Court of South Africa (Gauteng Division, Pretoria) functioning as Limpopo Division, Polokwane.

La nouvelle loi des sociétés d’Afrique du Sud (The New Companies Act No. 71  of 2008) a remplacé l’ancienne loi des sociétés (The Old Companies Act) en mai 2011. Conformément à l'amendement de l’ancienne loi des sociétés, la nouvelle loi introduit le redressement d'entreprises. Le redressement d'entreprises est une procédure qui facilite la réhabilitation d'une entreprise en difficultés financières. La procédure de redressement d'entreprise vise à maximiser les possibilités de l'entreprise à demeurer solvable.

In recent years, the Companies and Intellectual Properties Commission (“CIPC”) (and its predecessor, the Companies and Intellectual Property Registration Office (“CIPRO")) has been carrying out mass de-registrations of companies and close corporations for failure to file their annual returns. This phenomenon, and its severe negative effects on third party creditors, has been the focus of much legal scholarship. However, a short while ago it came to our attention that CIPC’s de-registration campaign also extends to companies that have been placed in liquidation.

Section 153 (1)(b)(ii) of the Companies Act 71 of 2008 (the Act) is intended to afford a remedy to affected persons who support a business rescue plan that has been 

The section can be broken down into five key elements:

It has a long been a principle of company law that the debts of a company are not the debts of its shareholders.  It may be a surprise to some that this principle does not apply to certain tax debts thanks to section 181 of the Tax Administration Act No.28 of 2011 (“section 181”). This section allows shareholders to be held jointly or individually liable for the tax debts of their company. At first glance it seems unfair to punish those who do not manage the day-to-day running of a company.