REPUBLIC OF SOUTH AFRICA

INSOLVENCY SECOND AMENDMENT BILL

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(As introduced in the National Assembly as a section 75-Bill; explanatory summary of Bill published in Government Gazette No. of ) (The English text is the official text of the Bill)

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(MINISTER FOR JUSTICE AND CONSTITUTIONAL DEVELOPMENT)

[B - 2002]

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010902SE

GENERAL EXPLANATORY NOTE:

[ ] Words in bold type in square brackets indicate omissions from existing enactments.

___________ Words underlined with a solid line indicate insertions in existing enactments.

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B I L L

To amend the Insolvency Act, 1936, so as to require notice of a petition for the sequestration of a debtor's estate to be given to employees of the debtor and registered trade unions representing such employees and to the South African Revenue Service; to provide for the service of sequestration orders on such employees, trade unions and the South African Revenue Service; and to make further provision regarding a debtor’s rights to compensation; to amend the Companies Act, 1973, so as to require notice of an application for the winding-up of a company to be given to employees of the company and registered trade unions representing such employees and to the South African Revenue Service; to provide for the service of winding-up orders on such employees, trade unions and on the South African Revenue Service; and to provide for a penalty; and to provide for matters incidental thereto.

BE IT ENACTED by the Parliament of the Republic of South Africa, as follows:—

Amendment of section 4 of Act 24 of 1936, as amended by section 3 of Act 16 of 1943, section 19 of Act 62 of 1995 and section 1 of Act 49 of 1996

1. Section 4 of the Insolvency Act, 1936 is hereby amended by the substitution for subsection (2) of the following subsection:

"(2) (a) Within a period of seven days as from the date of publication of the said notice in the Gazette, the petitioner [shall] must deliver or post a copy of the said notice to every one of the creditors of the debtor in question whose address he or she knows or can ascertain.

(b) The petitioner must further, within the period referred to in paragraph (a) furnish a copy of the notice —

(i) by post to every registered trade union that, to the petitioner's knowledge, represents any of the debtor's employees; and

(ii) to the employees themselves by affixing a copy of the notice to any notice board to which the employees have access inside the debtor's premises ; or

(iii) if there is no access to the premises by the employees, by affixing a copy to the front gate, where applicable, failing which the front door of the premises from which the debtor conducted any business immediately prior to the surrender; and

(iv) to the South African Revenue Service.".

Amendment of section 9 of Act 24 of 1936, as amended by section 6 of Act 16 of 1943, section 2 of Act 99 of 1965 and section 1 of Act 122 of 1993

2. Section 9 of the Insolvency Act, 1936, is hereby amended by the insertion after subsection (4) of the following subsection:

"(4A) (a) A debtor in respect of whom a petition is presented to court in terms of this section must, within two days after receiving notice of the petition furnish a copy thereof —

(i) to any registered trade union that, to the debtor's knowledge, represents any of the debtor's employees; and

(ii) to the employees themselves by affixing a copy of the petition to any notice board to which the employees have access inside the debtor's premises ; or

(iv) to the South African Revenue Service.

(b) A debtor who brings an application that a petition for the sequestration of the debtor's estate is an abuse of the court's procedures, or is malicious or vexatious need not comply with paragraph (a) until such time as that application has been determined.

(c) If a debtor's application referred to in paragraph (b) is unsuccessful, the debtor must comply with paragraph (a) within two days after the date of the order dismissing the application.".

Substitution of section 11 of Act 24 of 1936

3. The following section is hereby substituted for section 11 of the Insolvency Act, 1936:

"Service of rule nisi [upon the debtor]

11. (1) If the court sequestrates the estate of a debtor provisionally it [shall] must simultaneously grant a rule nisi calling upon the debtor upon a day mentioned in the rule to appear and to show cause why his or her estate should not be sequestrated finally.

(2) If the debtor has been absent during a period of twenty-one days from his or her usual place of residence and of his business (if any) within the Republic, the court may direct that it [shall be] is sufficient service of that rule if a copy thereof is affixed to or near the outer door of the buildings where the court sits and published in the Gazette, or may direct some other mode of service.

(2A) A copy of the rule must be served—

(a) on any trade union contemplated in section 4(2) or 9(4A);

(b) on the debtor's employees in the manner contemplated in section 4(2); and

(c) on the South African Revenue Service.

(3) Upon the application of the debtor the court may anticipate the return day for the purpose of discharging the order of provisional sequestration if twenty-four hours' notice of such application has been given to the petitioning creditor.

(4) For the purposes of serving the rule nisi in terms of subsection (2A), the sheriff must establish whether the employees are represented by a registered trade union and determine whether there is a notice board inside the employer's premises to which the employees have access.".

Substitution of section 15 of Act 24 of 1936

4. The following section is hereby substituted for section 15 of the Insolvency Act, 1936:

"Compensation to debtor if petition is an abuse of court's procedure or malicious or vexatious

14. Whenever the court is satisfied that a petition for the sequestration of a debtor's estate is an abuse of the court's procedure or is malicious or vexatious, the court may allow the debtor forthwith to prove any damage which he or she may have sustained by reason of the provisional sequestration of his or her estate and award him or her such compensation as it may deem fit.".

Amendment of section 136 of Act 24 of 1936

5. Section 136 of the Insolvency Act, 1936, is hereby amended by the addition after paragraph (c) of the following paragraph:

"(d) if he or she fails to comply with the provisions of section 9(4A).".

Amendment of section 346 of Act 61 of 1973 as amended by section 11 of Act 70 of 1984

6. Section 346 of the Companies Act, 1973, is hereby amended by the insertion after subsection (4) of the following subsection :

"(4A) (a) The directors of a company in respect of which an application is presented to court in terms of this section must, before the company makes the application or within two days after receiving notice of the application, furnish a copy thereof—

(i) to any registered trade union that, to the knowledge of the directors, represents any of the employees of the company; and

(ii) to the employees themselves by affixing a copy of the application to any notice board to which the employees have access inside the premises of the company; or

(iii) if there is no access to the premises by the employees, by affixing a copy to the front gate, where applicable, failing which the front door of the premises from which the company conducted any business immediately prior to the application; and

(iv) to the South African Revenue Service.

(b) If a company brings an application that an application for the winding up of the company is an abuse of the court's procedures, or is malicious or vexatious, the directors of the company need not comply with the paragraph (a) until such time as that application has been determined.

(c) If an application by a company referred to in paragraph (b) is unsuccessful, the directors of the company must comply with paragraph (a) within two days after the date of the order dismissing the application.

(d) Any person who fails to comply with any requirements of this subsection, is guilty of an offence.".

Insertion of section 346A in Act 61 of 1973

7. The following section is hereby inserted after section 346 of the Companies Act, 1973:

"Service of winding-up order

346A. (1) A copy of a winding-up order must be served—

(a) on any trade union contemplated in section 346(4A);

(b) on the employees of the company in the manner contemplated in section 346(4A); and

(c) on the South African Revenue Service.

(2) For the purposes of serving the winding-up order in terms of subsection (1), the sheriff must establish whether the employees of the company are represented by a registered trade union and determine whether there is a notice board inside the premises of the company to which the employees have access.".

Amendment of section 441 of Act 61 of 1973m as amended by section 30 of Act 111 of 1976, section 29 of Act 64 of 1977, section 27 of Act 59 of 1978, section 16 of Act 84 of 1980, section 30 of Act 83 of 1981, section 11 of Act 29 of 1985, section 15 of Act 31 of 1986, section 5 of Act 78 of 1989, section 7 of Act 69 of 1990, section 19 of Act 35 of 1998, section 21 of Act 37 of 1999 and section 27 of Act 35 of 2001

8. Section 441 of the Companies Act, 1973, is hereby amended by the substitution in subsection (1) for paragraph (d) of the following paragraph:

"(d) in section 37, 140A, 143, 145, 145A, 146, 146A, 147(2)(a), 148, 149, 153(4), 156, 162, 169, 218, 219, 255, 256(5), 260, 284, 346, 424 or 440D(3) or (4), to a fine or to imprisonment for a period not exceeding two years or to both a fine and such imprisonment;".

Short title and commencement

9. This Act is called the Insolvency Second Amendment Act, 2002, and shall come into operation on a date determined by the President by proclamation in the Gazette.