Business rescue legislation: Part C - Rights of affected persons during business rescue

Read Chapter 6 of the Companies Bill, 2007:

Go to Business rescue legislation forums to discuss these individual sections of Chapter 6 of the Companies Bill, 2007.

147. Rights of employees

(1) To the extent that any money became due and payable by a company to an employee at any time before the beginning of the company’s business rescue proceedings, and had not been paid to that employee immediately before the beginning of those proceedings, the employee is a senior unsecured creditor of the company for the purposes of this Chapter.

(2) During a company’s business rescue proceedings -

(a) each employee of the company may elect to exercise any rights as a creditor either directly, or by proxy through their registered trade union or, if the employee is not represented by a registered trade union, another employee organisation or representative;

(b) the employees of the company, acting collectively through their registered trade union or, to the extent that there are employees who are not represented by a registered trade union, another employee organisation or representative, are entitled to -

(i) notice of each significant court proceeding, decision, meeting or other relevant event concerning the business rescue proceedings;

(ii) participate in any court proceedings arising during the business rescue proceedings;

(iii) form a committee of employees’ representatives;

(iv) be consulted by the supervisor during the development of the business rescue plan, and to have an opportunity to review and consider any such plan before it is submitted to a meeting of creditors;

(v) to be present and to make a submission to the meeting of the holders of voting interests before a vote is taken on any proposed business rescue plan;

(vi) to vote with creditors on a motion to approve a proposed business plan, to the extent -

(aa) that the employee is a creditor, as contemplated in subsection (1); and

(bb) of any further voting interest contemplated in section 148(5)(b); and

(vii) if the proposed business rescue plan is not adopted, to –

(aa) propose the development of an alternative plan, in the manner contemplated in section 156; or

(bb) present an offer to purchase the interests of any or all creditors.

(3) A health and welfare scheme, or a pension scheme, for the benefit of the past or present employees of a company is an unsecured creditor of the company for the purposes of this Chapter to the extent of -

(a) any amount that was due and payable by the company to the trustees of the scheme at any time before the beginning of the company’s business rescue proceedings, and that had not been paid immediately before the beginning of those proceedings; and

(b) in the case of a defined benefit pension scheme, any unfunded liability under that scheme.

(4) The rights set out in this section are in addition to any other rights arising or accruing in terms of any law, contract, collective agreement, shareholding, security or court order.

148. Participation by creditors

(1) Each creditor is entitled to –

(a) notice of each significant court proceeding, decision, meeting or other relevant event concerning the business rescue proceedings;

(b) participate in any court proceedings arising during the business rescue proceedings;

(d) informally participate in those proceedings by making proposals for a business rescue plan to the supervisor.

(2) In addition to the rights set out in subsection (1), each creditor has -

(a) the right to vote to amend, approve or reject a proposed business rescue plan; and

(b) if the proposed business rescue plan is not adopted, a further right to -

(i) propose the development of an alternative plan, in the manner contemplated in section 156; or

(ii) present an offer to purchase the interests of any or all of the other creditors.

(3) The creditors of a company are entitled to form a creditors’ committee, and through that committee are entitled to be consulted by the supervisor during the development of the business rescue plan.

(4) In respect of any decision contemplated in this Chapter that requires the support of the holders of creditors’ voting interests –

(a) a senior unsecured creditor has a voting interest equal to the value of the amount owed to that creditor by the company;

(b) a secured creditor has a voting interest equal to the amount owed to that creditor by the company, minus the amount covered by their security, as appraised and valued by the supervisor; and

(c) a subordinated creditor, who would be subordinated in a liquidation, has a voting interest, as appraised and valued by the supervisor, equal to the amount, if any, that the subordinated creditor could reasonably expect to receive in such a liquidation of the company.

(5) In any vote concerning a business rescue plan, in addition to the voting interests referred to in subsection (4) -

(a) a contingent or prospective creditor affected by the proposed plan has a voting interest as appraised and valued by the supervisor; and

(b) in addition to any voting interest an employee may have as a creditor in terms of section 147, an employee of the company -

(i) who may be retrenched under the proposed plan has a voting interest equal to the value of the employee’s remuneration and benefits for the greater of –

(aa) three months; or

(bb) any notice or retrenchment period determined in accordance with any collective agreement or other time-limited contract that was in force immediately before the business rescue proceedings began, to the extent the employee is subject to such an agreement or contract;

(ii) whose terms and conditions of employment may be adversely affected by the proposed plan has a voting interest as appraised and valued by the supervisor in consultation with the employee’s representative, equal to the difference in value of the employee’s terms and conditions of employment over the period -

(aa) to the end of any collective agreement or other time-limited contract that was in force immediately before the business rescue proceedings began, to the extent the employee is subject to such an agreement or contract; or

(bb) of one year, in any other case.

(6) The supervisor of a company may -

(a) determine whether a creditor is independent for the purposes of this Chapter; and

(b) appraise and value an interest contemplated in subsection (4)(b) or (c), (5)(a), or (5)(b)(ii).

(7) A person may apply to the court to –

(a) review the supervisor’s determination that the person is, or is not, an independent creditor in terms of subsection (6)(a); or

(b) review, re-appraise and re-value that person’s voting interest, as determined by the supervisor in terms of subsection (6)(b).

149. Participation by shareholders

(1) During a company’s business rescue proceedings, each shareholder of the company is entitled to –

(a) notice of each significant court proceeding, decision, meeting or other relevant event concerning the business rescue proceedings;

(b) participate in any court proceedings arising during the business rescue proceedings, subject to section 133(2);

(d) vote to approve or reject a proposed business rescue plan, if the plan affects the class of shares held by that shareholder; and

(e) if the holders of voting interests, or shareholders, fail to approve a proposed business rescue plan, to –

(i) propose the development of an alternative plan, in the manner contemplated in section 156; or

(ii) present an offer to purchase the interests of any or all of the creditors or other shareholders.

150. First meeting of creditors

(1) Within 10 business days after being appointed, the supervisor must convene, and preside over, a first meeting of creditors, at which –

(a) the supervisor -

(i) must inform the creditors whether the supervisor believes that there is a reasonable prospect of rescuing the company; and

(ii) may receive proof of claims by creditors; and

(b) the creditors may determine whether or not a committee of creditors should be appointed and, if so, may appoint the members of the committee.

(2) The supervisor must give notice of the meeting to every creditor of the company whose name and address is known to, or can reasonably be obtained by, the supervisor, setting out -

(a) the date, time and place of the meeting; and

(b) the agenda for the meeting.

(3) At the meeting of creditors, a decision supported by the holders of a simple majority of the independent creditors voting interests voted on a matter, is the decision of the meeting on that matter.

151. First meeting of employees representatives

(1) Within 10 business days after being appointed, the supervisor must convene, and preside over, a first meeting of employees’ representatives, at which –

(a) the supervisor must inform the employees’ representatives whether the supervisor believes that there is a reasonable prospect of rescuing the company; and

(b) the employees’ representatives may determine whether or not an employees’ committee should be appointed and, if so, may appoint the members of the committee.

(2) The supervisor must give notice of the meeting to every registered trade union representing employees of the company, and if there are any employees who are not represented by such a registered trade union, to those employees, or their representatives, setting out -

(a) the date, time and place of the meeting; and

(b) the agenda for the meeting.

152. Functions, duties and membership of committees of affected persons

(1) A committee of employees, or of creditors, appointed in terms of section 150 or 151, respectively -

(a) may consult with the supervisor about any matter relating to the business rescue proceedings, but may not direct or instruct the supervisor;

(b) may, on behalf of the general body of creditors or employees, receive and consider reports relating to the business rescue proceedings; and

(c) must act independently of the supervisor to ensure fair and unbiased representation of creditors’ or employees’ interests.

(2) A person may be a member of a committee of creditors or employees, respectively, only if the person is -

(a) an independent creditor, or an employee, of the company;

(b) an agent, proxy or attorney of an independent creditor or employee, or other person acting under a general power of attorney; or

Go to Part D - Development and approval of business rescue plan.