SOUTH AFRICA Law and Practice Contributed by: Ulrike Naumann, Alison Mellon, Joshua Janks and Aneria Bouwer, Bowmans
guarantee. Note also that a company’s consti- tutional documents may impose restrictions on the provision of guarantees. 6.3 Requirement for Guarantee Fees There is no requirement for guarantee fees in South Africa. 7. Lender Liability 7.1 Equitable Subordination Rules South African law does not contain equitable subordination rules which apply to insolvency. It does, however, recognise the concept of sub- ordination (see 3.1 Senior Loan s and 4.1 Typi- cal Elements ). In addition, under the Insolvency Act, 1936, a liq- uidator can apply to a court to set aside certain transactions entered into by an insolvent per- son, prior to its liquidation. These transactions are known as impeachable dispositions. Dispo- sition means the transferring or relinquishing of the right to property by the insolvent person. Therefore, these provisions of the Insolvency Act pose a risk to acquisition finance transactions where an obligor goes insolvent. In terms of the Insolvency Act, 1936, the court may set aside the following dispositions. Disposition Without Value For the court to set aside a disposition without value, the liquidator must prove that – more than two years before the liquidation of the insolvent’s estate – a disposition of property was made by the insolvent and, immediately after the dis - position, the insolvent’s liabilities exceeded its assets and the disposition was not made for val- ue. Alternatively, the liquidator must prove that within two years of the liquidation, the insolvent
made a disposition of property not for value. In the latter case, the disposition will not be set aside if the creditor who benefited from the dis- position can prove that, immediately after the disposition was made, the insolvent’s assets exceeded its liabilities. Voidable Preferences The court can set aside a disposition if: • it was made within six months of the date of liquidation; • it has the effect of preferring one creditor over another; and • immediately after the disposition, the liabili- ties of the insolvent exceeded the value of its assets. However, the court will not set aside the disposi- tion if the person in whose benefit the disposition was made can prove that the disposition was made in the ordinary course of the insolvent’s business and it was not done with the intention The court can set aside a disposition when an insolvent, before its liquidation, makes a disposi- tion of its property when the insolvent’s liabilities exceed its assets, with the intention of preferring one creditor over another. Collusive Dealings The court can set aside a disposition where an insolvent, before its liquidation, in collusion with another person, disposes of its assets, in a man- ner which prefers one creditor over another. 7.2 Claw-Back Risk Aside from the concepts discussed above in 7.1 Equitable Subordination Rules , there are no to prefer one creditor over another. Undue Preferences to Creditors
409 CHAMBERS.COM
Powered by FlippingBook