Debtor and Creditors beware! Despite modelling the chapter 6 - Company Act 2008 on the US Chapter 11 framework, South Africa has yet to develop a "Rescue Culture", like that which we find in the US, the City (London) and across Asia. Instead we in SA have drifted towards the worst aspects of the continental "Insolvency Culture", without the benefits of some of their key enablers, for example
The EU is growing continually towards an aligned approach to business rescue (as it has with other laws and dictates under the Copenhagen criteria, which define eligibility criteria for membership of the EU), and its 2002 EU Insolvency Regulation, which very stand out in so far as
Many developing nations having recognised the need to liberalize bankruptcy and insolvency laws, went about choosing the US Chapter 11 law as a skeleton, and added to it parts of others approaches which were politically expedient or were aligned to an economic agenda, assuming then a natural domestic acceptance would evolve to complement the new legal framework. Many hold the opinion, that cultures will express a set of social values and hierarchies which in turn have laws created to preserve and protect these culturally defined constructs. Laws are the product of culture, not the other way, and where regulatory and legal insolvency frameworks have been copied, imported or duplicated, without due consideration of history, culture and attitudes, the expected benefits and the impact on the economy have been impeded. South Africa fits this view.
American's looked aghast at this and make comparison to penal law codes and debtor's gaols. Mercifully, since then most of the insolvency laws have been modernized and the insolvency regimes dragged kicking and screaming into the 21st century. historians will question this social anomaly, and we should to as Insolvency laws although measured by economic impact, are at their heart Social Welfare tools! In fact, in the US, the only real Social Welfare protection for citizens is to be found in their bankruptcy laws.
South African's looking to the US, London or the EU, because of theur cultural anchoring, will do well to observe the changes in attitudes and laws on either side of the Atlantic. The Chapter 11 laws were introduced in 1978, and South African's involved in insolvency, and bemoaning our own legal framework, whilst trumpeting the virtues of the US law would do well to think a little before speaking voicing their confident criticism again, as:
Meanwhile in the EU, politics has taken an interest in insolvency laws and things are changing quickly
The European Commission published its proposal for the Regulation to amend the EU Insolvency Frameworks in December 2012, which had the noble intent of addressing 5 areas of concern and improvement: ,Scope, Jurisdiction, Secondary proceedings, Publicity of proceedings and lodging of claims and is rapidly reforming and converging the laws across the EU
In November 2011 the European Parliament (EP) approved a ‘Motion for a European Parliament resolution with recommendations to the Commission on insolvency proceedings in the context of EU company law’.
Follow, EU Insolvency Proceedings and Evolving Policies to track their rapid evolution.
Careful observation indicates new and recent tendencies towards:
Use this information when you are confronted by intransigence and blinkered behavior of obstructive stakeholders regarding their accommodation of the various (and to them, new!) ways of collaborating within the informal workout process
It is not unreasonable to expect the workout stakeholders to be rational, logical, and consistent in their thinking. If they acknowledge their cultural leanings and the origins of their attitudes, then they should make sure that they evolve wit the times. The rational and logical will respond to the quantitative benefits of new ways of collaborating.
In those instances where obstinacy persists, (I know at least one bank's credit and rescue department), we can only conclude that they are vindictive and abusing their power, or unfit to perform the role they occupy. Regulators will act on this, and the press will do their bit.