Liquidations are no longer just about companies that cannot pay their debts. Liquidation has become a sophisticated tool of commercial strategising and restructuring, and the need for advice will increase with the introduction of the Business Rescue dispensation.
The Insolvency and Restructuring practice of Bowman Gilfillan straddles both the commercial and litigation departments. The practice comprises five partners and several associates who dedicate most or a significant part of their time to liquidations, insolvency (bankruptcy) and restructuring-related matters.
The Insolvency and Restructuring practice area covers all aspects of liquidations and insolvency, both corporate and personal, and ranging from applications to liquidate companies (whether listed, public or private) both in South Africa and abroad, sequestrations and the voluntary surrender of an individual's estate, advising shareholders on the voluntary winding up of companies, compositions, cross-border insolvency, insolvency-related litigation matters, judicial management, offers of compromise, schemes of arrangement, proof of claims, through to the implications of insolvency on commercial transactions and industry. The practice area also advises on the forthcoming Business Rescue dispensation in the proposed major revision of the South African Companies Act.
We have extensive litigation experience and can advise clients on the most expedient method of corporate recovery, such as by utilising the mechanism of a liquidation or sequestration application. In particular, we are able to offer focused advice to financial institutions, and other creditors on the advantages to be obtained by utilising the winding-up procedure as an alternative to instituting action in the event of default. We also advise clients regarding the efficacy and ranking of any securities that they or other parties hold and any steps which should be taken to improve their position.
We have conducted numerous investigations on behalf of creditors and liquidators to assess and advise on the validity of claims submitted by creditors the possibility of proceedings against directors and others personally, the setting aside of undue preferences and other impeachable transactions. Our team has dealt with some of the major corporate collapses, involving companies both in South Africa and off-shore. We have the expertise in-house to be able to undertake forensic investigations, and to prepare and run enquiry proceedings where witnesses testify under oath. This is an effective mechanism to be used with a view to establishing claims which will ultimately lead to a recovery of assets or funds for the benefit of creditors. We also have considerable expertise in advising on the ranking of security and preferences, and possible challenges to security and preferences claimed by creditors.
We are able to advise clients on the various implications of schemes of arrangement and offers of compromise, both from the perspective of a creditor faced with an offer of compromise and from the perspective of a client wishing to utilise the mechanism of a scheme of arrangement to acquire or restructure a business. We are also able to advise on the implications of such schemes of arrangement regarding the workforce, on existing contracts and in respect of the possible tax consequences of any proposed schemes.
Too often, parties to a commercial transaction do not give sufficient consideration to the consequences of one of the parties being liquidated or sequestrated during the course of the contract. We have the expertise to advise on and to deal with all implications that insolvency may have for a contract or proposed transaction. This includes advising on whether a contract itself may be set aside as an impeachable transaction, whether or not certain clauses in a contract may be enforceable, and the efficacy and enforceability of specific security arrangements in the event of the liquidation or sequestration of one of the parties. We also advise industry-specific clients such as long-term life insurers, banks and investment schemes, financial services companies, professional indemnity insurers, parastatals and the like on the impact of insolvency on specific aspects of their contracts, governing legislation and business. We also have expertise in the insolvency implications of structured finance and related transactions (local and cross border) and those utilising ISDA and related master agreements.
Our Insolvency and Restructuring practice advises foreign multi-nationals who wish to wind up a local South African subsidiary as part of a group restructuring. We advise on the necessary corporate actions that need to take place to wind up the local subsidiary voluntarily, in both solvent and insolvent circumstances. Foreign shareholders may appoint their local directors to the board of directors of a South African subsidiary, and this has implications of personal liability, upon which we are able to offer detailed advice. We are also able to advise on the circumstances when a deregistration of the local subsidiary may be considered as an alternative.
The Insolvency and Restructuring practice area works hand in hand with other practice areas such as employment law, litigation, corporate and banking law, in order to give the client complete and comprehensive advice. The Insolvency and Restructuring practice area prides itself on being at the forefront of new developments and trends within the insolvency common law, as well as relevant legislation. Members of the Insolvency and Restructuring practice area take an active interest in commenting on amendments to the insolvency legislation and new legislation, such as the proposed Business Rescue dispensation which will have a material impact on insolvency law in South Africa. Members of the team are members of and serve on the International Board of the International Association of Restructuring, Insolvency and Bankruptcy Professionals (INSOL), are members and Councillors of the Association of Insolvency Practitioners of South Africa (AIPSA), and are also members of the International Bar Association. The members of the practice area regularly contribute to publications and write articles on the developing law. The group also takes an active interest in training both its junior professionals as well as clients on general and topical insolvency issues and would be happy to tailor-make a series of lectures pertaining to a client's specific needs. For example, the practice area designed and lectured a course on insolvency law for the second year students at CIDA City Campus University.
All too often, companies experiencing cash flow or solvency constraints view consulting with an insolvency practitioner as a remedy of last resort, the final steps to lay the company to rest. However, if the warning signs are appreciated early enough, steps can be taken to restructure the company’s operations, to recapitalise the company and, if necessary refinance its liabilities, so as to avoid the looming insolvency. However, undertaking such an exercise while a company is staring down the barrel of technical or actual insolvency, requires skilful handling of issues such as whether or not the directors or shareholders could be accused of trading recklessly within the meaning of section 424 of the Companies Act, or whether the restructuring could constitute a voidable preference or impeachable transaction as contemplated in the Insolvency Act.
The Bowman Gilfillan Insolvency and Restructuring practice area, which straddles both the corporate and litigation departments, is well-placed to offer specialised corporate insolvency advice in structuring and implementing the recapitalisation, as well as drawing upon the wealth of experience within the firm’s corporate department for the drafting of the debt restructurings as well as private or institutional placements, and other forms of capital raising, rights issues and preference shares.