MD: Turnaround Talk
While one of the most developed legal systems on the African continent, the South African legal system has often been characterised as slow-moving, with cases facing significant delays before they even receive an initial court date. This presents a particular challenge for the business rescue, restructuring, and insolvency sector, as creditors and affected parties often become unintended victims of this predicament.
Our sector relies on early intervention, which will improve the outcomes of companies, shareholders, and affected persons. Therefore, the legal fraternity welcomes the introduction of the dedicated Insolvency Court, which came into effect on 14 April 2025.
How the court will function
Since the announcement of the court’s establishment, there has been speculation about how it will be run. Below is a comprehensive breakdown:
Insolvency Motion Court (IMC)
The IMC will handle sequestration and rehabilitation applications, voluntary and compulsory liquidations, business rescue applications under Chapter 6 of the Companies Act (71, 2008) and statutory reviews of decisions by the Master of the High Court.
The IMC will operate on a strict four-week case cycle, from filing to hearing. This aims to:
- Reduce the need for urgent applications;
- Improve planning and case management; and
- Speed up the resolution of both opposed and unopposed matters.
Insolvency Trial Court (ITC)
The ITC will deal with complex cases that need oral evidence, such as:
- Actions to set aside impeachable transactions under the Insolvency Act 24 of 1936 or the Companies Act (61, 1973);
- Applications under section 424 of the Companies Act involving personal liability of directors for reckless or fraudulent conduct; and
- Factual disputes requiring viva voce testimony.
A case will only proceed to trial once it has been certified as trial-ready, ensuring efficiency, avoiding unnecessary delays, and maintaining the integrity of the process.
Image By: Canva
Implications on the legal landscape
The new Dedicated Insolvency Court comes with several procedural directives to boost efficiency and specialisation:
- Mandatory four-week notice periods for all insolvency applications, whether opposed or unopposed;
- Compulsory classification of a matter as insolvency-related at filing, or it won’t be enrolled on the insolvency roll; and
- Automatic transfer of all pending insolvency-related matters from the general motion court roll to the dedicated insolvency roll starting 12 May 2025.
Practitioners should get familiar with the updated practice directives from the Office of the Deputy Judge President to ensure compliance.
Strategic Considerations
Legal professionals in insolvency and commercial litigation must adjust their strategies to meet the new timeframes and procedural expectations. Urgent applications should be reserved for truly exceptional cases.
Practitioners should ensure:
- All filings are procedurally compliant and properly categorised;
- Supporting affidavits are complete, comprehensive, and ready for early judicial review; and
- Trial matters are well-prepared, with witness statements, exhibits, and bundles ready in advance.
Failure to meet these standards may result in adverse cost orders, striking of matters from the roll, or unnecessary delays.
The Importance of Procedural Compliance
Liquidation and sequestration orders carry far-reaching consequences—not just for the debtor companies and their creditors but also for employees and other stakeholders.
The ruling in the matter between Rent a Tank JHB (Pty) Limited v Fuelgiants (Pty) Limited (2025/012156) [2025] highlights that many applications before the Insolvency Court were non-compliant, failing to adhere to statutory requirements outlined in the Insolvency Act (24, 1936) and the Companies Act (61, 1973), particularly regarding notification protocols.
Judge Gilbert pointed out that liquidation orders divest companies of control and place their assets under the management of liquidators, impacting contractual obligations, employee wages, and broader financial structures. Furthermore, the establishment of a concursus creditorum restricts actions that could diminish estate assets, underscoring the need for responsible judicial oversight.
Key Issues Identified in Recent Applications
The court reviewed several liquidation and sequestration cases and found consistent deficiencies, particularly in the notification of employees and registered trade unions. Some of the critical observations included:
- Failure to serve proper notice on employees and trade unions limits their ability to challenge proceedings;
- Inadequate efforts to ensure accessibility of application documents at business premises;
- Lack of substantive financial justification in several liquidation applications, with outdated or incomplete creditor demands;
- Non-compliance with statutory requirements governing winding-up procedures, including failure to lodge applications with the South African Revenue Service (SARS) and the Master of the High Court; and
- Judicial resources are wasted due to improperly enrolled cases, resulting in unnecessary court appearances.
The Consequences of Non-Compliance
In response to these failures, the court took decisive action, removing several cases from the roll and, in some instances, dismissing applications entirely. Crucially, in cases where attorneys and counsel demonstrated clear procedural neglect, the court issued orders preventing them from recovering legal fees related to the wasted court proceedings.
This ruling serves as a stern reminder to legal practitioners that the insolvency process cannot bypass procedural safeguards. The judgment reinforces that courts will not grant liquidation or sequestration orders unless the applications fully comply with statutory formalities, ensuring that all affected stakeholders receive proper notice and an opportunity to respond.
Image By: Canva
Looking ahead: a more robust insolvency framework
The establishment of a pilot insolvency court signals a new era for corporate restructuring and debt recovery in South Africa. By centralising insolvency matters, the court is poised to reduce procedural inconsistencies and streamline judicial oversight, ensuring greater efficiency and fairness.
As business rescue practitioners, creditors, and legal professionals navigate the evolving insolvency landscape, this judgment highlights the importance of strict adherence to statutory obligations. The future of insolvency law in South Africa hinges on responsible legal conduct, effective communication with affected parties, and a commitment to procedural integrity.
The ruling marks a milestone in reshaping insolvency proceedings, prioritising accountability, transparency, and due diligence. As the dedicated insolvency court continues its operations, stakeholders must remain vigilant in ensuring compliance or risk facing judicial scrutiny and financial penalties.
Modernising South Africa’s insolvency framework
The introduction of the Dedicated Insolvency Court marks a pivotal step in modernising South Africa’s insolvency framework, addressing longstanding delays and inefficiencies that have plagued business rescue and liquidation processes. By streamlining case management, enforcing stricter procedural compliance, and prioritising early intervention, the court is set to enhance outcomes for creditors, shareholders, and affected parties.
As insolvency practitioners and legal professionals adjust to the new expectations, adherence to statutory obligations will be non-negotiable. The recent ruling reinforces the importance of procedural precision, ensuring that all stakeholders receive fair notice and due process.
Ultimately, this development is not just an administrative shift, it is a transformational opportunity for South Africa’s business rescue and insolvency sector. With clear directives, specialised judicial oversight, and a structured timeline, the Dedicated Insolvency Court promises greater efficiency, accountability, and fairness, setting the stage for a more robust and transparent insolvency system.
Are you ready to navigate this evolving legal landscape?
