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Godknows Hofisi
I have previously written many articles on insolvency practice including corporate rescue proceedings.
I
n this article, I look at affected persons. Before I write about affected persons, let me briefly summarise what corporate rescue is.
Understanding corporate rescue
In my previous articles, I have explained that corporate rescue in Zimbabwe is known by other terms such as business rescue or in the past judicial management.
The proceedings are regulated by the Insolvency Act (Chapter 6:07) of 2018, hereinafter called “the Act”.
According to the Act, corporate rescue proceedings are meant to facilitate the rehabilitation of a company that is financially distressed. This will benefit affected persons including the company’s creditors.
Section 121 of the Act provides for:
Temporary supervision of the company and management of its affairs, business and property, and
Temporary moratorium (relief) on the rights of claimants against the company or in respect of property in its possession, and,
The development and presentation, if approved, of a plan to rescue the company by restructuring its affairs, business, property, debt, and other liabilities and equity.
Affected persons
The term “affected person” has a defined meaning in insolvency practice. According to section 121(1)(a) of the Insolvency Act, an affected person in relation to a company means:
A shareholder or creditor of the company,
Any registered trade union representing employees of the company,
If any of the employees of the company are not represented by a trade union, each of those employees or their respective employees.
Committee of affected persons
According to section 140(1)(b) the creditors of an insolvent company may determine whether or not a committee of creditors should be appointed and, if so, may appoint the members of the committee.
According to section 141(2) a person may be a member of a committee of creditors only if the person is:
An independent creditor of the company, or
An agent, proxy or attorney of an independent creditor or other person acting under a general power of attorney, or
Authorised in writing by an independent creditor to be a member.
Functions, duties and membership of committee of affected persons
These are regulated by section 141 of the Insolvency Act. According to the Act a committee of creditors:
May consult with the corporate rescue practitioner about any matter relating to the corporate rescue proceedings but may not direct or instruct the corporate rescue practitioner.
May, on behalf of the general body of creditors receive and consider reports relating to the corporate rescue proceedings.
Must act independently of the corporate rescue practitioner to ensure fair and unbiased representation of creditors’ interests.
Conclusion
During corporate rescue proceedings affected persons as defined in the Insolvency Act have rights. They also have limits. The corporate rescue practitioner needs to be familiar with these rights and limits. The affected persons also should be familiar with the relevant provisions of the law.
Disclaimer
This simplified article is for general information purposes only and does not constitute the writer’s professional advice.
Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), Hons B.Compt (UNISA), CA(Z), MBA(EBS, Heriot- Watt, UK) is the Managing Partner of Hofisi & Partners Commercial Attorneys, chartered accountant, insolvency practitioner, registered tax accountant and advises on deal and transactions. He has extensive experience from industry and commerce and is a former World Bank staffer in the Resource Management Unit. He writes in his personal capacity. He can be contacted on +263 772 246 900 or [email protected]
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