Abstract
Notably, the Insolvency Act provides that a sequestration order is any provisional or final order of court that enables the insolvent’s estate to be sequestrated by the relevant creditors (s 2). In this regard, the article explores different interpretational challenges regarding the effect of a final sequestration order on the insolvent’s lease contracts (s 37 of the Insolvency Act) and the inconsistent application of section 348 of the Companies Act 1973 to such contracts as provided in Ellerine case (par 1−15). Related challenges involving the application of the provisions of the Companies Act 1973 to the winding up of insolvent companies have been unmasked in various South African cases to date.
Highlights
The term “winding up” is not defined in both the Insolvency Act (24 of 1936, hereinafter “Insolvency Act”) and the Companies Act (71 of 2008, hereinafter “Companies Act 2008”), it is mostly employed in the latter Act
There are two main types of winding up, namely, winding up by court ( known as compulsory winding up; ss 79 and 81 of the Companies Act 2008 read with ss 343−348 of the Companies Act 61 of 1973) and voluntary winding up (s 80 of the Companies Act 2008 read with ss 349−353 of the Companies Act 1973)
As indicated in Ellerine case, the aforesaid challenges and confusion are normally exacerbated in contracts involving the insolvent party that is in mora while the other party has performed its obligations fully
Summary
The term “winding up” is not defined in both the Insolvency Act (24 of 1936, hereinafter “Insolvency Act”) and the Companies Act (71 of 2008, hereinafter “Companies Act 2008”), it is mostly employed in the latter Act. Given this background, the article investigates the effect of a winding-up order and/or sequestration proceedings on the insolvent’s contracts and the continued application of section 348 of the Companies Act 1973 in respect thereof. The article investigates the effect of a winding-up order and/or sequestration proceedings on the insolvent’s contracts and the continued application of section 348 of the Companies Act 1973 in respect thereof This follows the interpretational challenges regarding these aspects as indicated in Ellerine Brothers v McCarthy (245/13) [2014] ZASCA 46 (1 April 2014) (hereinafter “Ellerine case”). Related challenges involving the application of the provisions of the Companies Act 1973 to the winding up of insolvent companies have been unmasked in various South African cases to date (First Rand Bank Ltd v Lodhi 5 Properties Investment CC 2013 (3) SA 212 (GNP); HBT Construction and Plant Hire CC v Uniplant Hire CC 2012 (5) SA 197(FB); Herman v Set-Mak Civils CC 2013 (1) SA 386 (FB); Standard Bank of South Africa Ltd v R-Bay Logistics CC 2013 (2) SA 295 (KZD))
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