Davies: Thousand plus businesses need rescuingComment on this story
Johannesburg - More than 1000 business need to be rescued in South Africa to avoid liquidation, Trade and Industry Minister Rob Davies said on Tuesday.
“There are 1121 valid rescue processes in South Africa that have already started, with only 73 resulting in liquidation,” he said at a company law symposium in Johannesburg.
The symposium was examining, among other things, the Companies Act, business rescue processes, and takeovers and mergers.
“The figures tell me that there are remedies other than liquidation,” he said.
A local business newspaper reported on August 6 that the efficacy of the business rescue process was being reviewed.
According to the paper, the department of trade and industry and the special committee on company law, chaired by Michael Katz, had commissioned a study of the system, established three years ago under the new Companies Act.
Davies spoke about business takeovers and mergers.
He said the act made provision for the protection of shareholders, whether big or small.
He said the law protected minority shareholders from being trampled on during the process.
He however highlighted the need for stronger laws on “corporate raiders”.
According to Investopedia, a corporate raider is an investor who buys a large number of shares in a corporation whose assets appear to be undervalued.
The large share purchase would give the raider significant voting rights, which could then be used to push through changes in the company's leadership and management.
This would increase share value and generate a massive return for the raider.
Davies added that the country had no specialised business law practitioners to deal with company law.
“We don't have specialised lawyers, judges, and litigators to tackle business law,” he said.
Speaking about the Companies Act, Davies said it had made company registration “easier and quicker”.
Among those present at the event was former top US judge Myron Steele of the state of Delaware.
He said according to Delaware law, a shareholder could put a stop to the sale of a company by approaching the courts if he or she was unhappy with certain aspects of the process.
“If a stockholder is not happy with the direction to be taken, he or she can bring a lawsuit,” he said.
Steele said the court had to look at various aspects of the business and test the shareholder's motives for making such a move. - Sapa