Business rescue legislation: Part B - Supervisor's functions and terms of appointment

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.

141. Qualifications of supervisors

A person may be appointed as the supervisor of a company only if the person -

(a) has the prescribed qualifications;

(b) is not subject to an order of probation in terms of section 163; and

142. Removal and replacement of supervisor

(1) If the appointment of the supervisor by the company has not been set aside in terms of section 133, the supervisor may be removed only as provided for in this section.

(2) Upon request of an affected person, or on its own motion, the court may remove a supervisor from office on any of the following grounds:

(a) incompetence or failure to perform duties;

(b) failure to exercise the proper degree of care in the performance of their duties;

(d) the supervisor having become disqualified to serve in that capacity; or

(e) conflict of interest or lack of independence.

(3) The company must appoint a new supervisor if -

(a) a supervisor dies, resigns or is removed from office; or

(b) serious illness or any other event causes the supervisor to be unable to perform the functions of that office, subject to the right of an affected person to bring a fresh application to set aside that application in terms of section 133(1)(b).

143. Powers and duties of supervisors

(1) During a company’s business rescue proceedings, the supervisor -

(a) is responsible to supervise and advise the management of the company;

(b) may approve or veto any significant management decision taken by the board or the management of the company;

(c) may authorise the company to borrow in priority of existing obligations in order to fund ongoing business activities, subject to section 138;

(d) may -

(i) remove from office any person who forms part of the management of the company; or

(ii) appoint a person as part of the management of a company, whether to fill a vacancy or not, subject to subsection (2); and

(e) is responsible to supervise and assist the management of the company in developing a business rescue plan to be considered by affected persons, in accordance with Part D.

(2) A supervisor may not appoint a person as part of the management of the company, or an advisor to the company or to the supervisor, unless, immediately before the appointment, that person is independent of the company and the supervisor.

(3) During a company’s business rescue proceedings, the supervisor is an officer of the court for the purposes of this Chapter.

144. Investigation of the affairs of the company

(1) As soon as practicable after being appointed, the supervisor must investigate the company’s affairs, business, property, and financial situation; and after having done so, consider whether there is any reasonable prospect of the company being rescued.

(2) If, at any time during business rescue proceedings, the supervisor concludes that -

(a) there is no reasonable prospect for the company to be rescued, the supervisor must –

(i) so inform the court, the company, and all affected persons in the prescribed manner; and

(ii) apply to the court for an order discontinuing the business rescue proceedings and placing the company into liquidation;

(b) the company is not, or is no longer, insolvent, and there is no longer a reasonable probability of it imminently becoming insolvent, the supervisor must –

(i) so inform the court, the company, and all affected persons in the prescribed manner; and

(ii) file a notice of termination of the business rescue proceedings with the Commission; or

(i) reckless trading, voidable transactions, or breach of duty by the board, the supervisor must direct the management to take any necessary steps to rectify the matter;

(ii) fraud or other contravention of any law, the supervisor must -

(aa) forward the evidence to the appropriate authority for further investigation and possible prosecution; and

(bb) direct the management to take any necessary steps to recover any misappropriated assets of the company.

(3) A court to which an application has been made in terms of subsection (2)(a)(ii) may make the order applied for, or any other order that the court considers appropriate in the circumstances.

145. Directors of company to co-operate with and assist supervisor

(1) As soon as practicable after business rescue proceedings begin, each director of a company must deliver to the supervisor all books and records that relate to the affairs of the company and are in the director’s possession.

(2) Any director of a company who knows where other books and records relating to the company are being kept, must inform the supervisor as to the whereabouts of those books and records.

(3) Within 5 business days after business rescue proceedings begin, or such longer period as the supervisor allows, the directors of a company must provide the supervisor with a statement of affairs containing, at a minimum, the following information:

(a) transactions occurring before the business rescue proceedings began that involved the company or the assets of the company;

(b) any court, arbitration or administrative proceedings, including enforcement proceedings, involving the company;

(d) employees, and any collective agreements or other employment contracts; or

(e) debtors and their obligations; and

(f) creditors and their claims.

(4) A director of a company must attend to the requests of the supervisor at all times, and provide the supervisor with any information about the company’s affairs as may reasonably be required.

(5) No person is entitled, as against the supervisor of a company, to retain possession of any books or records of the company, or to claim or enforce a lien over any such books or records.

146. Remuneration of supervisor

(1) As soon as practicable after the appointment of a supervisor, the company and the supervisor must conclude a written agreement setting out the supervisor’s remuneration for services, and for expenses incurred in the business rescue proceedings.

(2) The remuneration and expenses contemplated in subsection (1) –

(a) must not include any provision for compensation or benefits calculated on the basis of a contingency related to –

(i) the adoption of a business rescue plan at all, or within a particular time, or the inclusion of any particular matter within such a plan; or

(ii) the attainment of any particular result or combination of results relating to the business rescue proceedings; and

(b) may be paid by the company as part of its operating costs; and

(c) to the extent that they are not fully paid, will rank in priority before the claims of all other secured and unsecured creditors.

Go to Part C - Rights of affected persons during business rescue.