Some thoughts on state regulation of South African insolvency law

• Published date: 01 January 2011
• Date: 01 January 2011
• DOI: 10.10520/EJC135331
• Pages: 290-318
• Author: Juanitta Calitz

290

Some thoughts on state regulation of South

African insolvency law*

Juanitta Calitz

BIur LLB LLM LLD

Senior Lecturer, Department of Mercantile Law, University of Johannesburg

OPSOMMING

Enkele gedagtes oor staatsregulering van die Suid Afrikaanse

insolvensiereg

Die grondslag van konstitusionalisme is dat die mag van die staat omskryf en

ingeperk moet word om die belange van die gemeenskap te beskerm en

daarom moet die doel van enige staatsregulering in Suid-Afrika wees om die

onderliggende waardes van die Grondwet te ondersteun en te beskerm. Die

belang van 'n moderne insolvensieregstelsel as belangrike hoeksteen van

volhoubare ekonomiese ontwikkeling is ook wyd erken en deur

internasionale instellings soos die Wêreldbank gedokumenteer. Terwyl die

fokus van die regshervormingsproses van die insolvensiereg dus moet wees

om die belange van die gemeenskap te beskerm sal dit onrealisties wees om

die breëre internasionale konteks te ignoreer.

Die artikel bespreek die geskiedenis, rol en funksie van die Meester van die

Hooggeregshof en lig sekere probleme ten opsigte van die Meester se

toesighoudende funksie oor die insolvensiereg uit. Die aanbeveling word

gemaak dat ten einde aan die internasionale standaarde te voldoen asook die

vertroue van die plaaslike gemeenskap te herwin, is dit nodig om 'n

onafhanklike reguleerder as deel van 'n reguleringsraamwerk in die Suid-

Afrikaanse insolvensiereg in te stel. Na aanleiding van die grondwetlike

aspekte van die reguleringsfunksie asook die internasionale maatstawwe wat

geïdentifiseer word, word daar dus aanbeveel dat die Suid Afrikaanse regs- en

beleidmakers terugkeer na die regshervormingsproses en opnuut die konsep

van staatregulering in die insolvensiereg oorweeg.

1Introduction

The question may be asked how the concept of state regulation in

general fits in with our perception of a modern insolvency law system.

The key factors that influence a country's insolvency system on an

economic, social and political level join forces to create the so-called

"cornerstones" or "building blocks" identified as essential to an effective

insolvency law system.1 These cornerstones consist of the legal

framework, which represents the various areas of law impacting on the

system,2 the institutional cornerstone, which is generally thought to be

1 This article is partially based on Calitz

A Reformatory Approach to State

Regulation of Insolvency Law in South Africa

(LLD thesis 2009 UP). I am

grateful to Mr Tienie Cronje for his input and comments. The views

expressed in this article remain my own.

1 Johnson "Toward International Standards on Insolvency: The Catalytic Role

of the World Bank" 2000

Law in Transitio n

71.

2

Inter alia

insolvency law, corporate law, tax law and labour law.

*

Thoughts on state regulation of South African insolvency law

291

the courts,3 and the regulatory cornerstone, which consists of both the

establishment and implementation of a regulatory body that has

oversight and responsibility for implementing the regulatory procedures

as well as the content of the regulations applicable to office holders

responsible for the administration of insolvent estates. The success of the

entire insolvency system rests on the proper functioning of all three

cornerstones.4

With the recognition of the Constitution5 as the supreme law of the

land, the legal community in South Africa has had to adapt from the old

concept of parliamentary sovereignty to a new model of constitutional

democracy.6 In

Holomisa v Argus Newspaper Ltd

7 Cameron J

summarised this principle very well: "The Constitution has changed the

'context' of all legal thought and decision-making in South Africa".8 The

foundation of constitutionalism is the principle that the power of the state

is defined and circumscribed by law to protect the interests of society

and thus the aim and purpose of any state regulation in South Africa

should be to ensure compliance with the underlying values of the

Constitution, which include the protection of societal interests.9

The significance of a modern insolvency system as a key foundation

of sustainable economic development has widely been acknowledged

and documented by international institutions such as the World Bank10

and the United Nations Commission on International Trade Law

3 With regard to the institutional framework of South African insolvency law,

South Africa does not at present have specialised insolvency courts. The

High Courts in general deal with insolvency matters, and play their part both

in applying and developing the law through case law. During the late 1990s

a high-level Commission of Inquiry, the Hoexter Commission, rejected

proposals for specialised insolvency courts in South Africa. See the third and

final report of the

Commission of Inquiry into the Rationalization of the

Provincial and Local Divisions of the Supreme Court

vol 1 Book 2 Part 3

(1997) Report number RP 201/9.

4 Uttamchandani "The Case for a Strong Regulatory Framework: The World

Bank Principles in Asia" (2006) unpublished paper presented at the

Forum on Asian Insolvency Reform V, China. On file with the author.

5 Constitution of the Republic of South Africa, 1996.

6Hoexter "'Administrative Action' in the Courts" 2006

Acta Juridica

303.

7 1996 6 BCLR 836 (W) 836J.

8 Botha "Administrative justice and interpretation of statutes: a practical

guide" in

The Right to Know

(ed Lange )(2004) 14.

9Burns

Administrative Law under the 1996 Constitution

(2003) 28.

10 See World Bank

Principles for Effective Insolvency and Creditor Rights

System

(2001) (also referred to as

Principles for Effective Insolvency and

Creditor Rights System

) at http://www.worldbank.org/ifa/ipg_eng.pdfl

(accessed 2011-07-31);World Bank

Revised Principles for Effective

Insolvency and Creditor Rights Systems

(2005) (also referred to as

Revised

Principles for Effective Insolvency and Creditor Rights Systems

) at http://

siteresources.worldbank.org/GILD/Resources/FINAL-ICRPrinciples-

March2009.pdf (accessed 2011-07-31); the revised and updated version

Principles for effective insolvency and creditor/debtor regimes

(2011) (also

referred to as

Principles for effective insolvency and creditor/debtor

regimes

) at http://siteresources.worldbank.org/INTGILD/Resources/ICRPrin

ciples_Jan2011.pdf (accessed 2011-07-31).