SOUTH AFRICA Law and Practice Contributed by: Ulrike Naumann, Alison Mellon, Joshua Janks and Aneria Bouwer, Bowmans
has been granted in respect of a transaction, an authorised dealer in foreign exchange will permit the repatriation of the proceeds of any appropri- ate realisation. 5.7 General Principles of Enforcement Security is an accessory obligation – ie, depend- ent on the existence, or coming into existence, of a valid and effective principal obligation. A secured creditor in an acquisition finance trans- action can, in theory, enforce its security on the default of the underlying principal obligation. A secured creditor can, in respect of certain types of security (including security pursuant to a cession in security, a pledge and a special notarial bond), without prior judgment against, or pursuit of, the security provider, procure the sale of the secured assets and apply the proceeds to satisfy the underlying principal obligation. However, in respect of mortgage bonds or gen- eral notarial bonds, the secured creditor must first take possession of the secured assets in order to perfect the security. In order to acquire possession, the secured creditor must obtain a court order which directs the sheriff of the High Court to attach the relevant assets. The secured creditor can then procure a sale of the assets and apply the proceeds of the sale of the rele- vant assets to discharge the principal obligation. In some cases, known as parate executie, (being the right of a creditor to realise a borrower’s property without first obtaining a court order), the secured creditor can simply agree with the borrower that the secured assets are sold with- out the need for judicial execution. Provided there is no prejudice to the security provider, an agreement of parate executie, dealing with movables pledged and delivered to the secured
creditor is valid. However, an agreement of this nature is invalid in relation to security over: • immovable property; and • secured assets not in the possession of the secured creditor at the time it wishes to enforce its rights.
6. Guarantees 6.1 Types of Guarantees
Guarantees are normally given by the target and all material group companies in acquisition finance transactions. These companies may be named in some transactions but are normally identified as subsidiaries that have a certain percentage of the group’s earnings before inter- est, tax, depreciation and amortisation or of the group’s gross assets or turnover. The security SPV structure also necessitates the giving of a guarantee by the security SPV. For more detail, see 5.1 Types of Security Com- monly Used . 6.2 Restrictions The restrictions which apply to the provision of security (see 5.5 Financial Assistance and 5.6 Other Restrictions ) also apply to guarantees. In addition, the board of each South African company providing a guarantee for the benefit of holders of the shares in that company, or another company within the same group of companies, is required to approve the provision of a guar- antee pursuant to Section 46 of the Companies Act, 2008. This approval requires the relevant board to satisfy itself that the company will con- tinue to meet the solvency and liquidity test as enunciated in Section 4 of the Companies Act, 2008, immediately following the provision of the
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