More than 1000 SA businesses need rescuing – Rob Davies

2014-08-19 15:52

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More than 1000 business need to be rescued in South Africa to avoid liquidation, Trade and Industry Minister Rob Davies has said.

“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.

The Business Day reported on August 6 that the efficacy of the business rescue process was being reviewed. According to the newspaper, the department of trade and industry and the special committee on company law, chaired by Michael Katz, had commissioned a study of the system, which was 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 business website 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”.

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