Post-Commencement Finance - Domiciled Resident or Uneasy Foreign Transplant?

Helena Stoop, Andrew Hutchison

Abstract


The 2008 Companies Act introduced a new business rescue regime into South African Company law, bringing it into line with trends in developed countries, particularly the United States.  Indeed, it appears that the United States Chapter 11 model was followed in this process, introducing the business rescue concept as a legal transplant.  Corporate law is well suited to legislative borrowing, but there are important caveats to bear in mind when doing so.  In particular: the context and legal culture of the origin country may differ from those of the destination country.  South Africa’s commercial environment is different from that of the United States, problematizing a transplant of Chapter 11’s concepts.  Post-commencement finance will be used as a micro-study of this broader phenomenon, and this topic will be investigated with comparative reference to the United States position.  It will be argued that an essential difference between the two procedures is the lack of legislatively mandated court oversight in South Africa.  This impacts on the interests of creditors, as well as the availability of fresh finance.  The result is problems in the implementation of the post-commencement finance provisions, which threaten the viability of this particular legal transplant.


Keywords


Company law; Business rescue; Post-commencement finance; Secured credit; United States Chapter 11; Legal transplants; Court oversight.

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DOI: http://dx.doi.org/10.17159/1727-3781/2017/v20i0a1370

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