Legislating business rescue in South Africa: a critical evaluation

Abstract

Social, political and economic changes in post-apartheid South Africa have generated the need for a major reform of the legislative regime governing companies in order to ensure that that regime is capable of addressing the challenges faced in domestic and international circles, and to also meet the demands of globalisation. These developments include the change in culture from company liquidations to commercial renewal which caused the Department of Trade and Industry (DTI) to embark on drastic reforms of South Africa’s business rescue mechanism as part of the broader company law reform project. The domestic and global environments have indeed changed drastically with corporate structures showing significant evolution. There are various reasons why businesses fail dismally in South Africa. Most notable among those reasons are: shortage of working capital, factors related to interest rates and the volatility of the rand, mismanagement and/fraud on the part of the management and directors, as well as the global economic meltdown in recent years. Outdated technology, inappropriate financial management policies employed by directors, lack of marketing strategies, strikes, loose information systems are additional factors contributing to corporate failures. Current worldwide trends have prompted the global move towards corporate rescue to prevent companies from becoming insolvent.