The competence of the foreign representative in cross-border insolvency matters : a comparison between South Africa and Australia

Abstract

The world is continuously becoming a smaller and smaller place. It has become a global community of sorts merely divided by imperceptible borders that are easily transversed by ever-evolving technological advances in the fields of business, travel, communication and such, each regulated by its own set of domestic laws and regulations. Hordes of South Africans immigrate to Australia annually due to, among others, economic and political uncertainty. These ex-patriots generally leave behind assets and creditors in South Africa whilst acquiring new ones wherever they choose to establish themselves. This serves as basis for potential future cross-border insolvency issues. Furthermore, entities such as companies trading internationally, and multinational companies with branches and offices in more than one state, have property and creditors in many different jurisdictions. Should such a company be liquidated, it would give rise to questions of jurisdiction, the procedures to be followed, the appointment of a liquidator(s) and the distribution of assets, to name a few. The absence of a universal cross-border insolvency law leaves room for much uncertainty and confusion. What is of importance for purposes of this research is to clarify all prevailing uncertainties regarding the rights and obligations of the foreign representative and the foreign creditor in cross-border insolvency matters. The foreign representative is the person or entity appointed to administer the reorganisation or liquidation of the insolvent debtor’s assets in a foreign proceeding. The inconsistency in cross-border insolvency regulations between South Africa and Australia has the consequence that there is no guarantee that a foreign creditor in one state will be treated the same as a foreign creditor in terms of the domestic laws of the other, as the Model Law aims to do. The situation would have been significantly less complicated had the South African Cross-Border Insolvency Act been in force at present and had Australia been designated as a state to which this Act would apply. In that case, the treatment of foreign representatives and foreign creditors would be of a reciprocal nature. This dissertation attempts, through an investigation of the South African and Australian domestic insolvency laws, to ascertain the position of the foreign representative and foreign creditors pre and post incorporation of the Model Law. Consequently this dissertation compares the legal positions of these parties in terms of South African and Australian national insolvency legislation.