Regulation of insolvency law in South Africa : the need for reform.
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Date
2014
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Abstract
Regulatory bodies must function properly in order for their duties to be performed. The
performance of the regulatory body impacts the entire insolvency system. Academics have
noted that the Master does not meet the standards of what is expected of an insolvency
regulator. The Constitution requires that the power of the state be defined and regulated by
the law to ensure the protection of the interests of society. State regulation must comply with
the underlying values of the Constitution which also includes the protection of the interests of
society. The state has a constitutional duty to protect societal interests, ensure that justice is
promoted and ensure that just administrative action is achieved. The Master also has the
requisite duty to protect societal interests. Academics have found that the objectives and
outcomes of the regulation of insolvency law are still not in line with the Constitution and the
values and principles it enshrines.
Criticisms of the Master’s office include the lack of resources and institutional capacity, the
lack of sufficient investigative powers and insufficient guidelines for the Master when
applying their administrative discretion when appointing provisional insolvency practitioners.
The lack of regulation of insolvency practitioners in South Africa has also been criticised
which has a negative impact on the performance of the insolvency industry. Academics have
proposed suggestions to reform the regulation of insolvency law in South Africa. However,
none of these suggested proposals have been implemented as yet.
The most recent development is the draft policy on the regulation of insolvency practitioners
that has been submitted to NEDLAC in 2012. The policy aims to provide guidelines relating
to the appointment of provisional insolvency practitioners. The policy also includes a code of
conduct which insolvency practitioners must adhere to in order to be appointed as a
provisional insolvency practitioner. The policy has the potential to provide sufficient
guidelines to the Master when appointing insolvency practitioners. The precise guidelines in
the policy reflect the need for transformation of the industry and the need for administratively
fair decision making. Thus, the provisions of the proposed policy will be effective in
countering the criticisms and transforming the insolvency industry and profession.
Foreign jurisdictions have also encountered the problem of lack of regulation of insolvency
practitioners. To circumvent this problem some foreign jurisdictions have made the recent
development of adopting (or considered adopting) self-regulation or co-regulation of
insolvency practitioners. In comparison to South Africa, they have made more progress
towards improving the regulation of insolvency practitioners. The result of this is that South
Africa is out of step with foreign jurisdictions. It is imperative that South Africa adopts
reform initiatives to strengthen the regulation of insolvency law.
Description
Thesis (LL.M.)-University of KwaZulu-Natal, Durban, 2014.
Keywords
South Africa. Insolvency Act, 1936, Bankruptcy--South Africa., Administrative procedure--South Africa., Law reform--South Africa., Theses--Business law.