The wolf in sheep’s clothing – when debtor-friendly is creditor-friendly: South Africa’s business rescue and alternatives learned from the United States’ Chapter 11
Authors Richard Bradstreet, Marius Pretorius, Philip Mindlin
Affiliations: Senior Lecturer in Commercial Law, University of Cape Town; Professor of Business Strategy, University of Pretoria; Partner at Wachtell, Lipton, Rosen & Katz, New York
Source: Journal of Corporate and Commercial Law & Practice, The, Volume 1 Issue 2, 2015, p. 1 – 41
The American Chapter 11 has inspired the reform of many legal systems globally to embrace the notion of reorganisation rather than administration. The recent corporate law reform in South Africa is an example of such an attempt to de-emphasise the right of creditors to liquidate a company, and develop a culture of reorganisation. The new South African procedure, called ‘business rescue’, enables a company to restructure its affairs more informally and with less judicial oversight than was previously possible. An independent third party then develops a formal plan to rescue the company, which must be approved by the body of creditors, while a moratorium prevents them from enforcing their existing claims. The authors analyse the problems that have arisen in business rescues in practice during the first four years of the procedure’s existence and, drawing from the experience of the United States, propose possible solutions to the shortfalls of business rescue that may also assist in developing a true reorganisation culture in South Africa.