South Africa’s insolvency guild is used to bad press for breakfast. On the morning of February 27, damning allegations of corruption in the Tongaat Hulett rescue soured a Business Rescue in Action event. Business rescue practitioners (BRPs) and adjacent heavyweights picked at deconstructed omelettes from martini glasses.
Last March, Roland Sutherland, deputy judge president of the Joburg high court at the time, said his division would pilot a dedicated insolvency programme. Helming the country’s busiest courthouse from April 2021 to his retirement in December 2025, Sutherland put a premium on expediency.
“I don’t have to belabour how important it is that insolvency matters are dealt with with a degree of acceleration, apart from the fact that liquidators are liable to be assassinated in South Africa,” Sutherland tells the FM.
Upon implementation in 2011, chapter 6 of the Companies Act of 2008 created the business rescue process. Alleged malfeasance at Tongaat salted fresh wounds; three prominent BRPs had been murdered in as many years.
“It’s a matter of great concern that requires collaboration by all stakeholders,” says judge Fiona Dippenaar of Joburg’s insolvency motion court committee. “I’m afraid that we still have the risk. It will have to be a broad collaborative effort to make sure that perpetrators of these crimes are brought to book. From a judge’s perspective, we take on the job to act without fear, favour or prejudice — high profile or not.”
Insolvency hearings began in Joburg in May last year, expanding to Pretoria in January. Sutherland hopes the programme will play a constructive role in an ecosystem with “a number of dark places” and, even peripherally, facilitate economic growth.
“We cannot expect investors who have the whole planet to park their money in to bring it here and get us out of our stagnant situation unless we can satisfy them that institutionally we are effective. When you lose, you need to know you’ve had a fair shake. Otherwise, why come here?”
Siviwe Dongwana, co-founder at restructuring and accounting firm Adamantem and one of the BRPs behind SAA, says: “One of the reasons they’re doing so well in America is that they have specialised courts.”
Yale law professor Alan Schwartz has investigated applications of US insolvency law for six decades. He puts it plainly: US bankruptcy code calls for “an administrative apparatus, called the bankruptcy court, which is overseen by a bankruptcy judge”.
In the US, 90 such courts adjudicate the code uniformly. That system’s efficiency is itself a lure for corporations that understand that outcomes answer to the market. The failures of DeLorean, Enron and Lehman Brothers have accordingly rendered “Chapter 11” an unforgiving byword for “bust”.
“The basic screen [for rescue] in America is creditors,” Schwartz says. “In France and other European countries, they have a system which essentially makes an independent assessment: ‘Is this firm good? Is this firm’s survival good for France?’ And if they think it is, they override the market judgment and will inject more liquidity. The major function of a business bankruptcy system in the US is to distinguish between firms that should be dissolved and firms that should be saved. It’s then a second-order consideration, but very important, to shepherd the firms that should be saved through a bankruptcy procedure.”
This is not the purpose of Gauteng’s pilot court. Yet.
Dippenaar boasts a “very, very quick” four-week lead time for Joburg’s insolvency matters, pointing to “efficiencies in terms of expertise” as well, citing a permanent judge and a pro bono acting judge from the pool of senior insolvency practitioners.
Haroon Laher heads corporate restructuring and insolvency at law firm Fasken. He believes the programme will strengthen confidence in South Africa’s business rescue regime.
“[It] will evolve. We are nowhere near the Chapter 11 framework, [which] relies heavily on the role of the court [and] can prevent the imposition of restructuring on dissenting creditors and avoid wealth transfer between powerful voting creditors. Delays contribute to liquidations,” says Laher.
It’s early days, but Dippenaar envisions jurisprudential trends. “We’re finding that practitioners are adhering to the relevant rules and requirements better than they did in the past, which results in fewer matters being struck off the roll because they’re not compliant.
“Statutorily, the requirements are set,” says Dippenaar. “Where intricacies come in would be in business rescue scenarios where there are often very interesting legal points and novel legal points that get raised.”
Case volumes in Durban and Cape Town might eventually warrant specialised courts, Sutherland says. Institutionally, though, Sutherland and Dippenaar concede that nothing can be done to ensure equal levels of expertise on rescue matters in places like Kimberley or Potchefstroom.
“Like everything in this country,” says Dongwana, “a magistrate’s court in Joburg is very different from a magistrate’s court in Bloemfontein.”