CRS Business Rescue
In-depth analysis of the business rescue provisions contained in Chapter 6 of the Companies Act No. 71 of 2008 and the Companies Amendment Act No. 3 of 2011

Section 138: Qualifications of practitioners

as amended by section 88 of the Companies Amendment Act No. 3 of 2011

(1) A person may be appointed as the business rescue practitioner of a company only if the person—

(a) is a member in good standing of a legal, accounting or business management profession accredited by the Commission; (Note: See Errata - the word "or" should have appeared here to indicate either (a) or (b)).

(b) has been licensed as such by the Commission in terms of subsection (2);

(c) is not subject to an order of probation in terms of section 162(7);

(d) would not be disqualified from acting as a director of the company in terms of section 69(8)

(e) does not have any other relationship with the company such as would lead a reasonable and informed third party to conclude that the integrity, impartiality or objectivity of that person is compromised by that relationship; and

(f) is not related to a person who has a relationship contemplated in paragraph (d). (Note: See Errata - should refer to paragraph (e) instead).

(2) For the purposes of subsection (1)(a)(ii), the Commission may license any qualified person to practice in terms of this Chapter, and may suspend or withdraw any such licence in the prescribed manner. (Note: See Errata - should refer to subsection (1)(b)  instead).

(3) The Minister may make regulations prescribing––

(a) standards and procedures to be followed by the Commission in carrying out its licencing functions and powers in terms of this section; and

(b) minimum qualifications for a person to practice as a business rescue practitioner, including different minimum qualifications for different categories of companies.

The regulations amplifying this section on qualifications of practitioners are contained in Regulation 126: Accreditation of professions and licensing of business rescue practitioners, and Regulation 127: Restrictions on practice.

Errata

Section 138 (1)(f) should read: is not related to a person who has a relationship contemplated in paragraph (e) [instead of paragraph (d)].

Section 138 (2) should read: For the purposes of subsection (1)(b) [not subsection (1)(a)(ii)], the Commission may license any qualified person to practice in terms of this Chapter, and may suspend or withdraw any such licence in the prescribed manner.

Difference between the English and Afrikaans versions of section 138 (1)(a)

In the last Companies Amendment Bill (Bill B40B) as amended by the Portfolio Committee on Trade and Industry (National Assembly), to be appointed as a business rescue practitioner, a person had to be a member of an accredited profession OR be licensed as such by the Commission (see excerpt below).  Note the "or" between section 138 (1)(a)(i) and (ii).

Section 138 (1) Companies Amendment Bill B40B
In the Companies Amendment Act No. 3 of 2011, however, to be appointed as a business rescue practitioner, a person had to be a member of an accredited profession AND be licensed as such by the Commission (see excerpt below).  Note the absence of the "or" between section 138 (1)(a) and (b), which implies that both subsections should be complied with.  The missing "or" is in conflict with the Companies Regulations, 2011, which were crafted on the basis that either of the subsections should be complied with, but not both.
Section 138 (1) Companies Amendment Act

In contrast to the English version, in the Afrikaans version (Maatskappywysigingswetsontwerp No. 3 of 2011) of the Companies Amendment Act No. 3 of 2011, to be appointed as a business rescue practitioner, a person had to be a member of an accredited profession OR be licensed as such by the Commission (see excerpt below).  Note the "of" (meaning "or") between section 138 (1)(a) and (b).  The Afrikaans version has the same meaning as that of the English language bills preceding the Companies Amendment Act, and is also consistent with the Companies Regulations, 2011, in that either of the subsections should be complied with, but not both.

Clearly, the English language Companies Amendment Act suffer from the accidental omission of a word that profoundly changes the intended requirements to be admitted as a business rescue practitioner.  The President, however, signed the incorrect English version and not the correct Afrikaans version.

Seksie 138 (1) Maatskappywysigingswet

Comments on amendment

First, the originally proposed regulator of business rescue practitioners is now replaced by the Companies and Intellectual Property Commission.  For more information on the Companies and Intellectual Property Commission see Meiring (2009).

Second, the English and Afrikaans text differs. The English text has lost the "or" between Sections 138(1)(a) and (b) that existed in the last Companies Amendment Bill.  The Afrikaans text has "of" between Sections 138(1)(a) and (b).

Therefore, using the Afrikaans text as the correct one, a business rescue practitioner must be either a member in good standing of a legal, accounting or business management profession that is accredited by the Commission, or has been licensed as such by the Commission. 

This means that apart from accountants and attorneys, whose professions are expected to be accredited by CIPC perhaps on qualified basis, turnaround professionals with other degrees may also practise as business rescue practitioners if licensed by CIPC. 

The licensing amendment was vigorously lobbied for by the author and the Turnaround Management Association - Southern Africa and submissions and discussions with the authors of the legislation. 

The regulations dealing with business rescue practitioner appointment issues, restrictions on practice and restriction on fees are:

References

Academic articles

Bradstreet, R. (2010, September). Exploring the Possibility of a Composite Business Rescue Practitioner. De Rebus.

Bradstreet, R. (2010). The Leak in the Chapter 6 Lifeboat: Inadequate Regulation of Business Rescue Practitioners May Adversely Affect Lenders' Willingness and the Growth of the Economy. SA Mercantile Law Journal, 22(2), p. 195-213.

Professional publications

Meiring, I. (2009, May). Regulatory Agencies in Terms of the Companies Act 71 of 2008. Werksmans Attorneys.

Professional web sites

Business Rescue. (2010, June). Tomlinson Mnquni James Attorneys.

CIPRO to Establish Companies and Intellectual Property Commission. (2010, November 2). Deneys Reitz Attorneys.

Brewis, T. (2011, June 15). Business Rescue Practitioner - A New Vocation. Cliffe Decker Hofmeyr Attorneys.

King, B. (2010, October 21). Good News for the Derivatives Business in South Africa. Deneys Reitz Attorneys.

Levenstein, E. (2010). Skills Are the Critical Success Factor in Business Rescue. Werksmans Attorneys.

LSSA to Ask CICP to Accredit Attorneys as Business Rescue Practitioners. (2011, June). Law Society of South Africa.

Van der Walt, J. (2010). Section 138: Qualifications of Business Rescue Practitioners. CRS Business Rescue.

Media articles

Crotty, A. (2009, December). Expertise Central To Business Rescue. Business Report.

Steyn, L. (2011, May 20). Bring Out the Rescue Remedy. Mail & Guardian Online.

Temkin, S. (2010, March 3). Business Rescuers Will Need Special Skills. Business Day.

Temkin, S. (2010, February 1). State Plan Hinges on Business Rescue Practitioners. Business Day.

Temkin, S. (2009, July 30). Turnaround Specialists Need Skills Criteria from Government. BusinessDay.

Acts and Regulations

Companies Amendment Act No. 3 of 2011 (English/Afrikaans version) pdf (5 920k).


Business rescue legislation

Other legislation cited by Chapter 6


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Business rescue provisions in the Companies Acts and Regulations

Business rescue provisions in Chapter 6 of the Companies Act No. 71 of 2008 pdf (323k).

Ondernemingreddingbepalings in Hoofstuk 6 van die Maatskappywet No. 71 of 2008 pdf (333k).

Business rescue provisions in Chapter 6 of the Companies Amendment Act No. 3 of 2011 pdf (279k).

Business rescue provisions in Chapter 6 of the Companies Amendment Act No. 3 of 2011 (English/Afrikaans version) pdf (792k).

Business rescue provisions in Chapter 6 of the unofficial LexisNexis Consolidated Companies Act pdf (105k).

Business rescue provisions in Chapter 6 of the Companies Regulations, 2011 pdf (62k).

Companies Acts and Regulations

Companies Act No. 71 of 2008 pdf (829k).

Mastskappywet No. 71 of 2008 pdf (545k).

Companies Amendment Act No. 3 of 2011 pdf (2 000k).

Companies Amendment Act No. 3 of 2011 (English/Afrikaans version) pdf (5 920k).

Unofficial LexisNexis Consolidated Companies Act pdf (945k).

Companies Regulations, 2011 pdf (951k).