CORPORATE INSOLVENCY ACT
Arrangement of Sections
1. Short title and commencement
3. Reference to receiver under enabling instrument
4. Appointment of receiver
5. Notification of appointment of receiver
6. Statement of company’s affairs
7. Offences relating to statement of affairs
8. Payment of preferential creditors
9. Eligibility for appointment as receiver
10. Disqualification of body corporate or firm from appointment as receiver
11. Remuneration of receiver
12. Receivers appointed by Court
13. Receivers appointed under deed of appointment
14. Liabilities of receivers on contracts
15. Statement of appointment of receivership on stationery
16. Management of assets before disposal
17. Statement of affairs and accounts where receiver appointed
18. Accounts of receivers
19. Report by receiver
20. Vacation of office by receiver
BUSINESS RESCUE PROCEEDINGS
21. Resolution to begin business rescue proceedings
22. Objections to resolution to begin business rescue proceedings
23. Court order to commence business rescue proceedings
24. Duration of business rescue proceedings
25. General moratorium on legal proceedings against company
26. Protection of property interests
27. Post-commencement finance
28. Effect of business rescue on employees and contracts
29. Invalidation of transfer of securities other than by ordinary course of business
30. Qualifications of business rescue administrators
31. Removal and replacement of business rescue administrator
32. General powers and duties of business rescue administrator
33. Investigation of affairs of company
34. Directors to co-operate with and assist business rescue administrator
35. Remuneration of business rescue administrator
36. Participation by creditors
37. Participation by holders of company’s securities
38. Participation by shareholders
39. First meeting of creditors
40. Functions, duties and membership of committees of creditors and employees
41. Proposal of business rescue plan
42. Meeting to determine future of company
43. Consideration and approval of business rescue plan
44. Failure to adopt business rescue plan
45. Discharge of debts and claims
SCHEMES OF ARRANGEMENTS AND COMPROMISE
46. Compromise between company, creditors and members
47. Effect of compromise or arrangement with creditors and members
48. Reconstruction and amalgamation of companies
WINDING-UP OF COMPANIES GENERALLY
49. References to member of company
50. Modes of winding-up
51. Liability of members on winding-up
52. Limitation of liability
53. Nature of liability of member
54. Liability on death or bankruptcy of member
WINDING-UP BY COURT
55. Jurisdiction over winding-up proceedings
56. Petition to wind-up company
57. Circumstances for winding-up by Court
58. Commencement of winding-up by Court
59. Payment of preliminary costs
60. Powers of Court on hearing petition
61. Power to stay or restrain proceedings against company
62. Avoidance of dispositions
63. Avoidance of attachments
64. Registration of copy of order
65. Provisional liquidator
66. Stay of actions
67. Appointment of liquidator by Court and performance of functions in absence of liquidator
68. Lodging of notice of appointment with Official Receiver and access to company
69. Control of liquidators by Official Receiver
70. Remuneration of liquidators
71. Custody and vesting of company’s property
72. Statement on company’s affairs
73. Report by liquidator
74. Powers of liquidator
75. Exercise and control of liquidator’s powers
76. Committee of inspection
77. Constitution and proceedings of committee of inspection
78. Application for order of release of liquidator and dissolution of company
79. Order for release and dissolution
80. Power to stay winding-up
81. Appointment of special manager
82. Claims of creditors and distribution of assets
83. Inspection of books by creditors and members
84. Power to summon persons connected with company
85. Power to order public examination
86. Power to arrest absconding member or officer
87. Cumulative powers of Court
88. Voluntarily winding-up
89. Commencement of voluntary winding-up
90. Effect of voluntary winding-up
91. Declaration of solvency
92. Appointment and remuneration of liquidator
93. Duty of liquidator to call creditors
94. Staying of members’ voluntary winding-up
95. Creditors’ voluntary winding-up
96. Appointment of committee of inspection
97. Fixing of liquidators’ remuneration and vesting of directors’ powers in liquidator
98. Stay of proceedings after commencement of creditor’s voluntary winding-up
MISCELLANEOUS PROVISIONS ON WINDING-UP
99. Distribution of assets of company
100. Court appointed liquidator
101. Reviewing remuneration during voluntary winding-up
102. Powers and duties of liquidators during voluntary winding-up
103. Liquidator to accept shares, etc., as consideration for sale of property of company
104. Annual meeting of members and creditors
105. Final meeting and dissolution of company
106. Arrangement entered before or during voluntary winding-up binding
107. Applications to determine questions or exercise of powers
109. Limitation on the right to voluntary wind-up
110. Meetings of creditors
111. Conduct of meetings of creditors
112. Eligibility for appointment as liquidator
113. Acts of Liquidator valid
114. General provisions on liquidators
115. Disposal of company’s assets by liquidator
116. Powers of Official Receiver where no committee of inspection
117. Appeal against decision of liquidator
118. Service of document on liquidator
119. Liquidator’s accounts
120. Notification of company in liquidation
121. Records of company
122. Payment of surplus funds to members
123. Unclaimed assets
124. Expenses of winding-up where assets insufficient
125. Meetings to ascertain wishes of members or creditors
126. Proof of debts
127. Preferential debts
128. Voidance of certain acts
129. Voidance of floating charge
130. Liquidator’s right to recover in respect of certain sales to or by company
131. Disclaimer of onerous property
132. Restriction of rights of creditor on execution or attachment
133. Duties of sheriff for goods in execution
134. Liability for contracting debt
135. Power of Court to assess damage against delinquent officers
136. Prosecution of delinquent officer and members
137. Fraud by officers of companies in liquidation
138. Winding-up of other bodies corporate
139. Winding-up of other foreign bodies corporate
140. Insolvency practitioners
141. Qualifications for appointment as insolvency practitioners
142. Accreditation of insolvency practitioner
143. Register of Insolvency Practitioners
144. Insolvency practitioner acting in foreign State
145. Eligibility for accreditation
147. Court to have jurisdiction
148. Public policy exceptions
149. Additional assistance under other laws
150. Limited jurisdiction
151. Access of foreign representative to Court
152. Application for recognition of foreign proceedings
153. Recognition of foreign proceeding by the Court
154. Subsequent information
155. Interim relief during proceedings for recognition
156. Relief granted upon recognition of foreign proceeding
157. Co-operation and communication between insolvency administrator and foreign representatives
158. Forms of co-operation
159. Communication of proceedings in Zambia after recognition of foreign main proceeding
160. Co-ordination in concurrent proceedings
161. Payment in concurrent proceedings
162. Regulations on cross-border insolvency
163. Electronic transactions and processes
164. Netting off
165. Exercise of discretionary power
166. Request for information
167. Registration of documents
168. Extension of time
169. Documents to be in official language
170. Administrative penalties
171. Offences by officers of companies relating to winding-up or other proceedings
172. Inducement relating to insolvency practitioner
173. Destruction, alteration, mutilation or falsifying of book, etc
174. Liability where proper accounts not kept
175. Responsibility for fraudulent trading
176. Offence by body corporate and principal officer or shareholders of body corporate or unincorporated body
177. General penalty
178. Rules by Chief Justice
180. Transitional provisions
to provide for corporate receiverships, appointment of receivers and the duties and responsibilities of receivers; business rescue, appointment, duties and responsibilities of business rescue administrators, rights of affected persons during business rescue proceedings and business rescue plans; schemes of arrangements or compromise with creditors; winding-up of companies, appointment of liquidators and the duties and responsibilities of liquidators, committees of inspection, special managers and the Official Receiver; insolvency practitioners and the duties and responsibilities of insolvency practitioners; cross-border insolvency; and matters connected with, or incidental to, the foregoing.
Act 9 of 2017.
This Act may be cited as the Corporate Insolvency Act, 2017, and shall come into operation on the date appointed by the Minister for the coming into operation of the Companies Act, 2017.
(1) In this Act, unless the context otherwise requires—
“account fairly stated” means the annual accounts stated in a manner that ensures sufficient disclosure, reasonable detail and absence of bias;
“accounting records” include—
(a) invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes, vouchers and other documents of prime entry; and
(b) such working papers and other documents as are necessary to explain the methods and calculations by which the accounts are made up;
“accounts” means the financial statements of a company or group of companies together with accompanying notes, excluding the auditors’ report or annual report of the company;
“affected person” includes a regulator, shareholder, member, director, creditor or an employee, a former employee of a company, registered trade union representing employees of the company and the Registrar;
“Agency” means the Patents and Companies Registration Agency established in accordance with the Patents and Companies Registration Agency Act, 2010;
“agent of the company” includes any banker or legal practitioner of the company and any person appointed by the company as auditor;
“annual accounts” means the annual financial statements of a company that give a true and fair view of the financial performance, financial position and cash flows of the company, including the consolidated financial statements for a group of companies that give a true and fair view of the group of companies’ financial performance, financial position and cash flows;
“auditor” has the meaning assigned to the word in the Accountants Act, 2008;
“bailiff” means an officer appointed in accordance with the Sheriffs Act;
“bank” has the meaning assigned to the word in the Banking and Financial Services Act, 2017;
“beneficial owner” has the meaning assigned to the word in the Companies Act, 2017;
“board of directors” means the board of directors of a company and “board” shall be construed accordingly;
“body corporate” has the meaning assigned to the word in the Companies Act, 2017;
“book” has the meaning assigned to the word in the Companies Act, 2017;
“business” includes a trade or profession;
“business rescue administrator” means a person qualified in accordance with section 30 and appointed as an administrator for purposes of business rescue proceedings;
“business rescue plan” means a plan provided for in accordance with section 41;
“business rescue proceedings” means the process of facilitating the rehabilitation of a company that is financially distressed by providing for—
(a) the temporary supervision of the company and management of its affairs, business and property;
(b) a temporary moratorium on the rights of claimants against the company or in respect of property in its possession; or
(c) the development and implementation, if approved in accordance with this Act, of a plan to rescue the company by restructuring its affairs, business, property, debt and other liabilities and equity in a manner that maximises the likelihood of the company continuing in existence on a solvent basis or, if it is not possible for the company to so continue in existence, results in a better return for the company’s creditors or shareholders than would result if the company was to be liquidated;
“charge” has the meaning assigned to the word in the Companies Act, 2017;
“committee of inspection” means a committee of inspection appointed in the course of a winding-up in accordance with this Act;
“company” has the meaning assigned to the word in the Companies Act, 2017;
“contingent creditor” means a prospective or anticipated creditor;
“control” means the control of a company by a person who—
(a) beneficially owns more than 25 percent of the issued share capital of the company;
(b) is entitled to vote a majority of the votes that may be cast at a general meeting of the company, or has the ability to control the voting of a majority of those votes, either directly or through a controlled entity of that person;
(c) is able to appoint or to veto the appointment of a majority of the directors of the company;
(d) is a holding company and the company is a subsidiary of that company as provided for in the Companies Act, 2017;
(e) in the case of a company that is a trust, has the ability to control the majority of the votes of the trustees, to appoint the majority of the trustees or to appoint or change the majority of the beneficiaries of the trust; or
(f) has the ability to materially influence the policy of the company in a manner comparable to a person who, in ordinary commercial practice, can exercise an element of control referred to in paragraphs (a) to (e);
“corporate” means an entity, including a company or body corporate, that is separate and distinct from its owners and which is recognised as such by law and acts as a single entity;
“Court” means the High Court for Zambia;
“creditor” means a person who is entitled to claim that debt is owing to that person by a company and includes a person entitled to enforce a final judgment or order of the Court;
“creditors’ voluntary winding-up” means a voluntary winding-up of a company by the creditors where no declaration of insolvency was made;
“current liability” means a liability that would, in the ordinary course of events, be payable within 12 months after the end of the financial year to which the accounts of a company or group of companies relate;
“debenture” means a document issued by a corporate that evidences or acknowledges a debt of the corporate, whether or not it constitutes a charge on property of the corporate, in respect of money that is or may be deposited with or lent to the corporate, other than a document of the following kinds—
(a) a document acknowledging a debt incurred by the corporate in respect of money that is or may be deposited with or lent to the corporate by a person—
(i) in the ordinary course of a business carried on by the person; and
(ii) in the ordinary course of such business of the corporate as is not part of a business of borrowing money and providing finance;
(b) a document issued by a bank in the ordinary course of its banking business that evidences or acknowledges indebtedness of the bank arising in the ordinary course of that business;
(c) a cheque or order for the payment of money or bill of exchange; and includes—
(i) a unit of a debenture;
(ii) debenture stock;
(iii) a bond; and
(iv) any other security issued by a company, whether constituting a charge on the assets of the company or not;
“debenture holder” includes a debenture stockholder;
“declaration” means a declaration of insolvency made by the Official Receiver;
“declaration of solvency” means a declaration made in accordance with section 91;
“deed of appointment” means the instrument by which the holder of a charge appoints a receiver;
“director” means a person appointed as a director of a company in accordance with the Companies Act, 2017 and the words “the directors” means the directors acting collectively;
“dissolution” means the termination of a company’s legal existence by liquidation in accordance with this Act;
“establishment” means any place of operations where a debtor carries out non-transitory economic activity;
“financial institution” has the meaning assigned to the word in the Banking and Financial Services Act, 2017;
“financially distressed” means a company is likely to be insolvent within the immediately ensuing six months;
“financial year” has the meaning assigned to the word in the Companies Act;
“foreign Court” means a judicial or other authority competent to determine foreign proceedings;
“foreign main proceeding” means proceedings taking place in the State where the debtor’s main interests are situated;
“foreign non-main proceeding” means foreign proceedings, other than a foreign main proceeding, taking place in a State where the debtor has an establishment;
“foreign proceeding” means a judicial or administrative proceeding in a foreign State, including an interim proceeding, pursuant to a law relating to insolvency in which the assets and affairs of the debtor are subject to determination by a foreign Court, for the purpose of re-organisation or liquidation;
“foreign representative” means a person or body, including one appointed on an interim basis, authorised in a foreign proceeding to administer the re-organisation or the liquidation of the debtor’s assets or affairs or to act as a representative for the foreign proceedings;
“general meeting” means an annual general meeting or an extraordinary general meeting;
“goods” includes personal property;
“independent creditor” means a person who is—
(a) a creditor of the company, including an employee of the company; and
(b) not related to the company, a director, or the business rescue administrator;
“insolvency practitioner” means the Official Receiver or a person who is qualified to be appointed—
(a) a receiver, receiver manager or judgment receiver;
(b) a liquidator; or
(c) business rescue administrator,
of a company, as specified in sections 139 and 142;
“insolvency proceeding” means a judicial or administrative proceeding relating to bankruptcy, liquidation, receivership, judicial or statutory management or voluntary administration;
“insolvent” means having liabilities that exceed the value of assets, having stopped paying debts in the ordinary course of business or being unable to pay them as they fall due;
“judgment receiver” means a receiver who collects or diverts funds from a judgment debtor to the creditor;
“liquidation” means the process of converting the property of a company into cash in order to settle the company’s debt and other liabilities;
“liquidator” means a person appointed to wind-up the affairs of a company;
“member” means a shareholder or stockholder of a company or a subscriber to a company limited by guarantee;
“members voluntary winding-up” means the termination of a corporation, initiated by the board of directors and approved by the shareholders;
“Oath” has the meaning assigned to the word in the Constitution;
“officer” includes a—
(a) director, secretary or executive officer of a body corporate; and
(b) local director of a foreign company;
“Official Receiver” means the person appointed as official receiver under the Bankruptcy Act;
“ordinary resolution” has the meaning as assigned to the word in the Companies Act, 2017;
“property” means the assets of the company, including money, goods, choses in action and land, whether real or personal, legal or equitable and situated in Zambia or elsewhere, and obligations, easements and every description of estate, interest and profit, present or future, vested or contingent and arising out of, or incidental to the property;
“proposal” means a proposal for a voluntary arrangement or for extension of time;
“provable claim” includes any claim or liability provable in proceedings commenced or lodged in accordance with this Act by a creditor;
“provisional liquidator” means the Official Receiver or any person appointed provisionally by the Court after the presentation of a winding-up petition but before the making of a winding-up order;
“receiver” means a disinterested individual appointed as a receiver, receiver manager or judgment receiver, in accordance with this Act, for a corporate or other person, for the protection or collection of property that is the subject of diverse claims, is litigated or has been litigated or income arising from the property of the corporate or other person, and includes the Official Receiver;
“recognised professional body” means a professional body recognised by the Minister as a professional body, in accordance with this Act;
“record’’ includes a computer record and any other non-documentary record;
“Register of Insolvency Practitioners” means the Register kept by the Registrar in accordance with section 143;
“Register of Liquidators” means a Register of liquidators kept by the Registrar in accordance with this Act;
“Register of receivers” means a Register of receivers kept by the Registrar in accordance with this Act;
“Registrar” means the Registrar appointed under the Patents and Companies Registration Agency Act, 2010;
“relative” in relation to an individual means—
(a) a parent, spouse, son, daughter, brother, sister, nephew, niece, uncle, aunt, grandparent or cousin of the individual;
(b) a parent, child, brother or sister of the spouse of the individual; or
(c) a nominee or trustee of any of the persons specified in paragraph (a) or (b);
“secured creditor” means a person holding a mortgage, pledge, charge or lien on, or against, the property of the debtor or any part thereof as security for a debt due or accruing to that person from a debtor, or a person whose claim is based on, or secured by, a negotiable instrument held as collateral security and on which the debtor is only indirectly or secondarily liable;
(b) debt securities;
(c) public debt securities;
(e) any rights, options or derivatives in respect of any such shares, debt securities or public debt securities;
(f) any rights under a contract to secure a profit or avoid a loss by reference to fluctuations in—
(i) the value or price of any shares, debt securities or public debt securities;
(ii) the value or price of a group of shares, debt securities or public debt securities; or
(iii) an index of shares, debt securities or public debt securities;
(g) unit trusts and interests under collective investment schemes;
(h) commercial paper;
(i) depository receipts;
(j) warehouse receipts; or
(k) any other instrument commonly known as securities or which are prescribed by a relevant authority,
excluding bills of exchange, promissory notes, certificates of deposit issued by a bank;
“security agreement” means an agreement under which property becomes subject to a security for the performance of an obligation;
“service provider” means an entity or person who supplies water and sanitation services, electricity, telecommunications or such other services as may be prescribed;
“shareholder” has the meaning assigned to the word in the Companies Act, 2017, and includes a person who is the beneficial owner of, holds shares in, or is in a position to exert control over more than 15 percent of the shares of a company or body corporate;
“shares” means an ownership interest or stocks issued or proposed to be issued by a company in the capital of the company;
“solvency test” means a test to determine that—
(a) a company is able to pay its debts as they become due in the normal course of business; and
(b) the value of the company’s assets is greater than the value of its liabilities, including contingent liabilities;
“special manager” means a person appointed in accordance with section 81 to manage an estate or business of a company, or the interests of the creditors or members generally, where the liquidator is satisfied of the necessity of such an appointment due to the nature of the estate or business;
“special resolution” has the meaning assigned to the word in the Companies Act, 2017;
“successor in title” means the successor of a person and includes an heir, executor, liquidator, administrator or other legal representative of a person, as the case may be;
“supervision” means the oversight imposed on a company during that company’s business rescue proceedings;
“transaction” includes a gift, agreement or arrangement, and “entering into a transaction” shall be construed accordingly;
“trustee” means a trustee in bankruptcy of a member, as provided in section 54;
“voluntary arrangement” means an arrangement entered into by a company and that company’s creditors by way of—
(a) a composition for the satisfaction of the company’s debts;
(b) a scheme; or
(c) arrangement of the company’s affairs;
“voting interest” means an interest that is appraised and valued in accordance with section 39; and
“winding-up” means the process of settling accounts and liquidating assets in anticipation of a company’s dissolution.
(2) A word or term used in this Act which is not defined but is defined in the Companies Act, Securities Act, 2016, or the Banking and Financial Services Act, 2017, shall have the meaning assigned to it in those Acts.
A reference in this Act to the appointment of a receiver under powers vested in any instrument, includes a reference to an appointment made under powers which, by virtue of any law, are implied in, and have effect as if, vested in that instrument.
(1) Where a charge over property of a company has become enforceable, the Court may, on the application of the chargee, appoint a receiver of the property.
(2) The Court may, in the case of a floating charge, whether or not the charge has become enforceable, on the application of the chargee, appoint a receiver of the property and undertaking of the company if the charge is satisfied that events have occurred or are about to occur which render it unjust to the chargee that the company should retain power to dispose of the company’s assets.
(3) A person may appoint a receiver under deed of appointment.
(4) An individual shall not be appointed as a receiver unless the individual is eligible for appointment as provided in section 9.
(5) A person shall not be appointed as receiver as a means of enforcing a debenture where there is no secured interest.
(1) A person who obtains an order for the appointment of a receiver, or who appoints a receiver under a deed of appointment, as specified in section 4, shall, within 14 days after obtaining the order or making the appointment, lodge a notice of the order or appointment with the Registrar, in the prescribed form.
(2) A person who is appointed as a receiver shall, within 14 days after the appointment, lodge with the Registrar and the Official Receiver a notice in the prescribed form.
(3) Where a person ceases to be a receiver, the person shall, within seven days after ceasing to be a receiver, lodge with the Registrar a notice that the person has ceased to be a receiver.
(4) The Registrar shall, on the lodgement of a notice as specified in sub-section (1) or (3), cause a notice of the appointment of the person as receiver or the cessation of the person as receiver, to be published in the Gazette.
(1) Where a receiver is appointed over all or a part of the assets of a company, unless the Court otherwise directs, the directors of a company shall, within three months of the appointment of the receiver, prepare and submit to the receiver a statement as to the affairs of the company as at the date of the appointment of the receiver, showing—
(a) the particulars of the company’s assets and liabilities;
(b) the names and addresses of the company’s creditors;
(c) the securities held by each of the creditors;
(d) the dates when the securities were respectively given; and
(e) such further information as may be prescribed or as the receiver may require.
(2) The statement, referred to in sub-section (1), shall be verified by a statutory declaration of at least one director or the secretary of the company not later than seven days after the preparation of the statement.
(3) Where the directors of a company fail or neglect to prepare the statement referred to in sub-section (1), the receiver shall, not more than three months after the expiry of the period referred to in sub-section (1), prepare a statement of the affairs of the company, from the available information.
(4) A receiver may, subject to the direction of the Court, by notice in the prescribed manner and form, require a person to verify, by statutory declaration, such part of the statement, specified in sub-section (1), as that person is in a position to verify, if that person—
(a) is, or was, within two years before the date of the appointment of the receiver, an officer of the company; or
(b) took part in the formation of the company, if the company was formed less than two years before the date of the appointment of the receiver.
(5) A person required to verify a statement, in accordance with sub-section (4), shall, within 14 days after receiving the notice referred to in that sub-section, or within such extended period as the receiver or the Court may specify, submit a statutory declaration verifying the statement specified in sub-section (3) or such part of the statement as that person is in a position to verify.
(6) A receiver shall, within 21 days after receiving the statement submitted in accordance with sub-section (1) or a statutory declaration submitted in accordance with sub-section (5), cause copies to be—
(a) filed with the Court, if the receiver is appointed by the Court;
(b) lodged with the Registrar;
(c) delivered to the Official Receiver, if the Official Receiver is not the receiver; and
(d) lodged with the holder of the charge by virtue of which the receiver was appointed.
(7) A person required under this section to verify a statement shall be paid, out of the assets of the company, such costs and expenses incurred in and relating to the verification of information, as the receiver considers reasonable, subject to an appeal to the Court.
(8) The Registrar may, where a receiver does not—
(a) submit a statement of affairs, in accordance with sub-section (1), issue a reminder to the receiver to submit the statement within 14 days; and
(b) comply with the notice issued by the Registrar under paragraph (a), cause the receiver to be disqualified from acting as a receiver under this Act.
(9) A statement made in accordance with this section may be used as evidence in any proceedings against a person making it.
(1) Where a person or an officer contravenes section 6, the person or officer commits an offence and is liable, on conviction—
(a) to a fine not exceeding one hundred thousand penalty units or to imprisonment for a period not exceeding one year, or to both; and
(b) in the case of a continuing offence, to a fine not exceeding fifty thousand penalty units for each day that the failure continues or to imprisonment for a period not exceeding 18 months, or to both.
(2) Despite the generality of sub-section (1), a person that provides false or misleading information with respect to a statement of affairs made in accordance with section 6 commits an offence and is liable, on conviction, to a fine not exceeding two hundred thousand penalty units or to imprisonment for a period not exceeding two years, or to both.
Where a receiver is appointed on behalf of the holder or trustee of any debenture of a company that is secured by a floating charge, or possession is taken by or on behalf of the holder or trustee of the debenture of property comprised in or subject to the charge, if the company is not at the time in the course of being wound-up, the debts which in every winding-up are to be paid in priority to all other debts, as provided in this Act, shall—
(a) be paid out of any assets coming into the hands of the receiver or the person taking possession in priority to any claim for principal or interest in respect of the debentures; and
(b) the date of the appointment of the receiver or of possession being taken, shall be considered to be the date of commencement of the winding-up.
(1) An individual is eligible for appointment as a receiver if that individual has been practicing as a chartered accountant or a legal practitioner for a period of at least seven years and is accredited by the Registrar as an insolvency practitioner.
(2) An individual who wishes to perform the function of a receiver shall apply for accreditation in the prescribed manner and form and pay the prescribed fee.
(3) An individual shall not be appointed, act or continue to act as a receiver of the property or undertaking of a company if the individual is—
(a) by reason of a mental disability incapable of performing the functions;
(b) prohibited or disqualified from so acting by any order of a court of competent jurisdiction;
(c) a mortgagee or chargee of the company;
(d) an undischarged bankrupt;
(e) a person who is, or has been within the previous two years, a director or officer of the company or any related body corporate, except with the leave of the court;
(f) a trustee under any trust deed for the benefit of debenture holders of the company, except with the leave of the court;
(g) a person who has been convicted, within the previous five years, of an offence involving fraud or dishonesty; or
(h) a person who has been removed, within the previous five years, from an office of trust by order of a court of competent jurisdiction.
(4) Accreditation as a receiver is valid for a period of one year from the date of accreditation and is subject to renewal in the prescribed manner and form and upon payment of the prescribed fees.
(5) Accreditation that is not renewed in accordance with sub-section (4) is void.
(6) A person who acts or continues to act as a receiver, contrary to this Act, commits an offence and is liable, on conviction, to a fine not exceeding two hundred thousand penalty units or to imprisonment for a period not exceeding two years, or to both.
(1) Subject to sub-section (2), a body corporate or firm is not qualified for appointment as a receiver and a body corporate or firm which acts as such is liable to a fine not exceeding two hundred thousand penalty units.
(2) This section does not apply to the Official Receiver.
(1) Subject to sub-section (2), a receiver is entitled to the payment of a fee which shall be a percentage of the proceeds of the receivership.
(2) Despite the generality of sub-section (1), the fee payable to a receiver shall not exceed an amount that may be prescribed by statutory instrument.
(3) Despite sub-sections (1) and (2), the Court may, on the application of a company, liquidator or receiver by order, fix the amount to be paid by way of remuneration to a receiver and may, on application made by the company, or liquidator or receiver, vary or amend the order.
(4) The power of the Court as specified in sub-section (3) shall—
(a) extend to fixing the remuneration for any period before the making of the order or the application therefor, where the Court is satisfied that there are special circumstances making it proper to do so;
(b) be exercisable despite the receiver dying or ceasing to be the receiver before the making of the order or the application therefor; and
(c) extend to requiring the receiver or the personal representatives of the receiver to account for any amount that the receiver may have been paid or retained for remuneration, before the making of the order, that is in excess of the remuneration fixed for that period.
(5) A receiver who collects a fee in excess of the prescribed fees, shall be personally liable, to reimburse the amount of the excess fees so collected or to a fine not exceeding one hundred thousand penalty units or to imprisonment for a period not exceeding one year, or to both.
A receiver appointed by the Court shall be an officer of the Court and shall be considered, in relation to the property or undertaking, not to be an officer of the company, and shall act in accordance with the directions and instructions of the Court.
(1) A receiver appointed under a deed of appointment shall, subject to section 14, be considered to be an agent and officer of the company, and not an agent of the persons by or on behalf of whom the receiver is appointed, and the receiver shall act in accordance with the deed of appointment under which the receiver is appointed, and with any directions of the Court specified in an order of the Court.
(2) The Court may, on the application of a receiver, make such order as it considers necessary to provide direction, in any matter relating to the performance of the receiver’s functions or declaring the rights of persons before the Court or otherwise.
(1) Where a contract was entered into by a receiver in the proper performance of the receiver’s functions, the receiver has, subject to the rights of any prior encumbrances, an indemnity in respect of any liability relating to the property.
(2) Where the receiver was appointed under a deed of appointment, and a contract was entered into by the receiver with the express or implied authority of the person appointing the receiver, the receiver is indemnified from liability, to the extent to which the receiver is unable to recover on any assets under a charge, in accordance with the deed of appointment.
(3) A receiver is personally liable on any contract entered into by the receiver in contravention of this Act.
(1) Where a receiver has been appointed, every invoice, order or business letter issued by or on behalf of the company or receiver, being a document on or in which the name of the company appears, shall contain a statement that a receiver has been appointed.
(2) If the company fails to comply with this section, the company, receiver or any officer concerned, commits an offence and is liable, on conviction, to a fine not exceeding three thousand penalty units for each document not containing the statement.
(1) A receiver shall, before disposing of any asset under a charge, manage the asset so as to realise the monies owed to the secured creditor without disposing the asset by sale, unless the management of the asset shall be further depleted or not satisfy the debts owed to the secured creditor.
(2) Subject to sub-section (1), a receiver shall, where the receiver decides to dispose of an asset under a charge by sale, dispose of the asset at the highest possible amount and shall, after satisfying the secured creditor’s debt and the receiver’s fees, pay the difference to the company.
(3) A receiver shall, unless directed by the Court or by a resolution of creditors or members passed at a general meeting or by a committee of inspection—
(a) dispose of an asset under a charge by public tender or by the most transparent manner in the circumstances; and
(b) not less than 21 days before the disposal, notify the Registrar in the prescribed manner and form, of the intention to dispose of the asset.
(4) A receiver who contravenes this section commits an offence and is liable, on conviction, to a fine not exceeding fifty thousand penalty units.
Where a receiver is appointed of the whole, or substantially the whole of the undertaking of a company, on behalf of the holders of any debentures secured by a floating charge, sections 73, 118 and 126 apply as if the company had been ordered to be wound-up and the receiver had been appointed liquidator.
(1) Except where section 17 applies, a receiver shall within 30 days, or such longer period as the Registrar may allow—
(a) after the end of the period of six months from the date of the receiver’s appointment, and of every subsequent period of three months until the receiver ceases to act, lodge simultaneously with the Registrar and Official Receiver an abstract showing the receiver’s receipts and payments during that period of three months; and
(b) within 30 days, or such longer period as the Registrar may allow, after ceasing to be receiver, lodge with the Registrar an abstract showing the receiver’s receipts and payments during the 12 month period from the last abstract, if any, and the total of the receipts and payments during the whole period of the receiver’s appointment.
(2) The Registrar may require a receiver to produce any document, or information concerning the affairs of the company.
(3) A receiver who contravenes this section commits an offence and is liable, on conviction, to a fine not exceeding one thousand penalty units for each day that the failure continues.
(1) A receiver shall, as soon as is practicable, report the matter, in writing, to the Registrar or official Receiver, where the receiver, in the course of performing the functions and duties of a receiver determines that—
(a) there is a contravention of, or failure to comply with, any of the provisions of this Act by any person; and
(b) the circumstances are such that the matter has not been or will not be adequately dealt with by bringing the matter to the notice of the directors of the company or, if the company is a subsidiary, of the directors of the holding company.
(2) The Court may, on its own motion, or on the application of the Registrar or Official Receiver, or of any person interested in the appointment of the receiver, require the receiver to submit a report, to the Registrar or Official Receiver, on any matter relating to the company in which the receiver has information.
(1) The office of a receiver becomes vacant where the receiver—
(b) becomes ineligible for appointment as specified in section 9;
(c) is removed by order of the Court; or
(d) is removed from the Register of Insolvency Practitioners in accordance with section 143.
(2) A receiver may resign from office by giving one month’s notice, in writing, to the appointing authority or the Court, of the receiver’s intention to resign.
(3) A receiver may be removed by the Court, on application to the Court by the holder of a charge by virtue of which the receiver was appointed, or by revocation of the deed of appointment.
(4) Where a receiver vacates office—
(a) the receiver’s remuneration and any expenses properly incurred by the receiver; and
(b) any indemnity to which the receiver is entitled out of the property of the company;
shall be paid out of the property of the company which is subject to a charge and such remuneration shall have priority in accordance with this Act as a secured creditor.
(5) Where a receiver ceases to be receiver or is removed by the Court, the holder of the charge by virtue of which the receiver was appointed shall, within 14 days of the cessation of the receivership or removal of the receiver, notify the Registrar and Official Receiver in the prescribed form and manner of the cessation or removal and the Registrar shall enter the notice in the Register of Receivers.
(6) If, by the expiry of a period of 30 days following the removal of a receiver or the cessation of a receivership and no other receiver is appointed, the deed by virtue of which the receiver was appointed shall cease to attach to the property.
(7) A person who contravenes this section commits an offence and is liable, upon conviction, to a fine not exceeding one hundred thousand penalty units or to imprisonment for a period not exceeding one year, or to both.
BUSINESS RESCUE PROCEEDINGS
(1) Subject to sub-section (2)(a), the member may by special resolutions, resolve that the company voluntarily begins business rescue proceedings and place the company under supervision, if the board has reasonable grounds to believe that—
(a) the company is financially distressed; and
(b) there appears to be a reasonable prospect of rescuing the company;
(i) maintain the company as a going concern;
(ii) achieve a better outcome for the company’s creditors as a whole than is likely to be the case if the company were to be liquidated; or
(iii) realise the property of the company in order to make a distribution to one or more secured or preferential creditors.
(2) A resolution made in accordance with sub-section (1)—
(a) shall not be adopted if liquidation proceedings have been initiated by or against the company; and
(b) becomes effective after it has been filed with the Registrar.
(3) Within 30 days after the board has filed the resolution, referred to in sub-section (1), or such longer time as the Registrar, on application by the company, may allow, the company shall—
(a) give notice of the resolution and its effective date, to every affected person in the prescribed manner; and
(b) appoint a business rescue administrator.
(4) The company shall, after appointing a business rescue administrator—
(a) file a notice with the Registrar of the appointment of the business rescue administrator, within seven business days after making the appointment; and
(b) publish a copy of the notice of appointment of the business rescue administrator to each affected person, within 21 business days after the notice is filed.
(5) If a company fails to comply with sub-section (3) or (4)—
(a) the company’s resolution to begin business rescue proceedings and place the company under supervision shall lapse after a period of 60 days from the adoption of the resolution; and
(b) the company shall not file a further resolution for a period of three months after the date on which the resolution lapsed unless the Court approves the company filing a further resolution.
(6) A company that adopts a resolution to begin business rescue proceedings shall not adopt a resolution to begin liquidation proceedings, unless the resolution has lapsed as specified in sub-section (5), or until the business rescue proceedings have ended as provided in section 24(2).
(7) Where the board has reasonable grounds to believe that the company is financially distressed but does not adopt the resolution to begin business rescue proceedings, the board shall deliver a notice to each affected person and its reasons for not adopting such a resolution.
(1) Subject to sub-section (2), at any time after the adoption of a resolution as specified in section 21 and until the adoption of a business rescue plan in accordance with section 43, an affected person may apply to a Court for an order—
(a) setting aside the resolution on the grounds that—
(i) there is no reasonable basis for believing that the company is financially distressed;
(ii) there is no reasonable prospect for rescuing the company; or
(iii) the company has failed to satisfy the procedural requirements set out in section 21;
(b) setting aside the appointment of the business rescue administrator, on the grounds that the business rescue administrator—
(i) is not qualified as provided in section 30;
(ii) is not independent of the company or its management; or
(iii) lacks the necessary skills, having regard to the company’s circumstances; or
(c) requiring the business rescue administrator to provide security in an amount and on terms and conditions that the Court considers necessary, to secure the interest of the company and any affected person.
(2) A director who voted in favour of a resolution to begin business rescue proceedings as provided in section 21 shall not apply to the Court, as specified in sub-section (1), to set aside the resolution or the appointment of the business rescue administrator, unless the director satisfies the Court that in supporting the resolution, the director acted in good faith, on the basis of information that was subsequently found to be false or misleading.
(3) An affected person making an application, in terms of sub-section (1), shall—
(a) serve a copy of the application on the company and the Official Receiver; and
(b) notify each affected person of the application in the prescribed manner.
(4) An affected person may participate in the hearing of an application made in terms of this section.
(5) The Court may, when determining an application made in accordance with paragraph (a) of sub-section (1)—
(a) set aside the resolution—
(i) on any ground set out in that sub-section; or
(ii) if, having regard to all of the evidence, the Court determines that it is otherwise just and equitable to do so; and
(b) afford the business rescue administrator sufficient time to form an opinion whether—
(i) the company appears to be financially distressed; or
(ii) there is a reasonable prospect of rescuing the company;
and after receiving a report from the business rescue administrator, may set aside the company’s resolution, if the Court determines that the company is not financially distressed or there is no reasonable prospect of rescuing the company.
(6) The Court may, where it makes an order under paragraph (a) or (b) of sub-section (5) make any further appropriate order, including—
(a) an order placing the company under liquidation; or
(b) if the Court finds that there were no reasonable grounds for believing that the company is insolvent, make an order for costs against any director who voted in favour of the resolution to begin business rescue proceedings, unless the Court is satisfied that the director acted in good faith.
(7) If, after considering an application made in accordance with paragraph (b) of sub-section (1), the Court makes an order setting aside the appointment of the business rescue administrator—
(a) the Court shall appoint another business rescue administrator who is qualified as specified in section 30, recommended by, or accepted by, the holders of a majority of the independent creditors’ voting interests who were represented in the hearing before the Court; and
(b) the provisions of paragraph (b) of sub-section (5), if relevant, shall apply to the business rescue administrator.
This section of the article is only available for our subscribers. Please click here to subscribe to a subscription plan to view this part of the article.