Evaluating the Utilisation of the National Credit Act 34 of 2005 to Enhance the Recovery of Distressed Financial Entrepreneurs: Lessons from the United States of America
Keywords:
Entrepreneurship, debt relief scheme, consumer debtors, business debtors, post-commencement finance, rehabilitiationAbstract
Debt relief involves various measures and strategies that are designed to alleviate and/or restructure debt obligations of
the borrower so as to enhance their capacity to comply with such obligations when they are due. This article assesses the
adequacy of Chapter 4 of the National Credit Act 34 of 2005 (NCA) in relation to the recovery processes of businesses operated
by natural persons, especially sole proprietorships. Most natural persons operate their businesses as sole proprietorships and/or
independent entrepreneurs. Accordingly, financially distressed sole proprietorships businesses should have access to flexible debt
relief schemes rather than rigid consumer based credit measures that are stipulated under Chapter 4 of the NCA. The consumer
based credit measures in Chapter 4 of the NCA are more favourable to individual consumer debtors than the needs of budding
entrepreneurs such as sole proprietorships. In this regard, the South African policy makers should consider adopting possible
lessons from Chapter 13 of the United States of America (US) Bankruptcy Code, Pub. L. 95-598, Title 1, 11 U.S.C. 101, 6
November 1978, 92 Stat.2549 (US Bankruptcy Code), especially sections 1301 to 1330, which deals with the adjustment of debts
for individuals with regular income.
References
Bertelsmann, E, Evans, RG, Harris, A, Kelly-Louw, M, Loubser, A, Roestoff, M, Smith, A, Stander, L,
Calitz, J, De la Rey, E & Steyn, L. (2019). Mars: The Law of Insolvency in South Africa. Cape Town: Juta
& Co. Ltd.
Bertelsmann, E, Evans, RG, Harris, A, Kelly-Louw, M, Loubser, A, Roestoff, M, Smith, A, Stander, L,
Calitz, J, De la Rey, E & Steyn, L. (2008). Mars The Law of Insolvency in South Africa. Cape Town: Juta
& Co. Ltd.
Boraine, A. & Van Heerden, C. (2010). To Sequestrate or Not to Sequestrate in View of the National
Credit Act 34 of 2005: A Tale of Two Judgments. Potchefstroom Electronic Law Journal, 13(3), pp. 84-
Boraine, A., Van Heerden, C.A. & Roestof, M. (2012). Comparison Between Formal Debt
Administration and Debt Review - The Pros and Cons of these Measures and Suggestions for Law
Reform (Part 1). De Jure, 45(1), pp. 62-80.
Boraine, A & Renke, S. (2007). Some Practical and Comparative Aspects of the Cancellation of
Installment Agreements in Terms of the National Credit Act 34 of 2005 (Part 1). De Jure, pp. 222-235
Chitimira, H., & Mabina, T.T. (2019). The Meaning of Advantage to Creditors Under Voluntary,
Compulsory and Friendly Sequestration in South Africa. Acta Universitatis Danibius Juridica, 15(2), pp.
-83.
Chokuda, C.T. (2013). An Application for Debt Review Does Not Constitute An Act of Insolvency: First
Rand Bank Ltd v Janse Van Rensburg. The South African Law Journal, 130(1), pp. 5-18.
Essay, M. (2017). The Impact of Loadshadding on Small and Medium Enterprises in the City of
Johannesburg. MCom Finance Thesis: University of Johannesburg.
Loubser, A. (2010). Some Comparative Aspects of Corporate Rescue in South African Company Law.
Doctor of Laws Thesis, UNISA.
Loubser, A. (2007). Defining the Unincorporated Business in Financial Distress: Should it be Treated as a
Business or as a Consumer? South African Mercantile Law Journal, 19(4), pp. 444-461.
Mabe, Z. & Evans, R.G. (2014). Abuse of Sequestration of Proceedings in South Africa Revisited. SA
Mercantile Law Journal, pp. 651-667.
Mabe, Z. (2019). Alternatives to Bankruptcy in South Africa that Provides for a Discharge of Debts:
Lessons from Kenya. PER Journal, 22(1), pp. 1-34.
Maghembe, N. (2011). The Appellate Division has Spoken - Sequestration Proceedings Do Not Qualify
as Proceedings to Enforce a Credit Agreement Under the National Credit Act 34 of 2005: Naidoo v
ABSA Bank 2010 (4) SA 597 (SCA). Potchefstroom Electronic Law Journal, 14(2), pp. 171-180.
National Credit Regulations Number 6. (2017). “Interpretation of Section 71 of the NCA”, pp. 1-2.
National Credit Regulator. (2018). “The Debt Counselling Fee Guidelines” 001/2018, pp.1-4.
Otto, J.M.& Otto, R.L. (2016). The National Credit Act Explained. Cape Town: LexisNexis.
Pepler, J.J. (2013). Advantage for Creditors in South African Insolvency Law – A Comparative
Investigation. LLM dissertation. University of Pretoria.
Roestoff, M. (2010). Termination of Debt Review in Terms of Section 86(10) of the National Credit Act
and the Right of a Credit Provider to Enforce its Claim: Standard Bank of South Africa Ltd v Kruger
(Unreported Case Number 45438/09 (GSJ)) and Standard Bank of South Africa Ltd v Pretorius
(unreported case number 39057/09 (GSJ)). Obiter, pp. 782-792.
Roestoff, M., Haupt, F., Coetzee, H. & Erasmus, M. (2009) .The Debt Counselling Process – Closing the
Loopholes in the National Credit Act 34 of 2005. PER Journal, 12(4), pp. 247-306.
Sharrock, R., Van Der Linde, K. & Smith, A. (2012). Hockly’s Insolvency Law. Cape Town: Juta & Co.
Ltd.
The Department of Trade & Industry (DTI). (2004). “South African Company Law for the 21 Century”,
Government Gazette No.26493, General Notice 1183, pp. 1-54).
Van Heerden, C., & Boraine A. (2009). The Interaction Between Debt Relief Measures in the National
Credit Act 34 of 2005 and Aspects of Insolvency Law. Potchefstroom Electronic Law Journal, 12(3), pp
–63.
Van Heerden, C.M. and Coetzee, H. (2019). Unintentionally Trapped by Debt Review: Procedural
Inadequacies in the National Credit Act 34 of 2005 Relating to Withdrawal from the Debt Review
Process. Potchefstroom Electronic Law Journal, 22, pp. 1-69.
Case Law
South African Case Law
Amod v Khan 1947 2 SA 432 (N).
Daniels v Sensational Debt Relief (Pty) Ltd (WC), unreported case number 10065/17 of 3 August 2017.
De Villiers NO v Maursen Properties (Pty) Ltd 1983 (4) SA 670 (T).
DP Du Plessis Prokureurs v Van Aarde 1999 (4) SA 1333 TPD.
Ex Parte Ford; Ex Parte Venter; Ex Parte Botes 2009 (3) SA 376 (WCC).
Firstrand Bank v Kona & Another 20003/2014 [2015] ZASCA 11.
Firstrand Bank Ltd v Evans 2011 4 SA 597 (KZD).
Investec Bank Ltd v Mutemeri 2010 (1) SA 265 (GSJ).
Koöperasie Bpk v Joubert 1980 (3) SA 1117 (T).
Naidoo v ABSA Bank 2010 (4) SA 597 (SCA).
Manamela v Du Plessis t/a Debt Safe and Others (78244/2016) [2017] ZAGPPHC 289.
Mokubung v Mamela Consulting and Others (87653/2016) [2017] ZAGPPHC 462.
Nedbank v National Credit Regulator 2011 (3) SA 581 (SCA).
National Credit Regulator v National Consumer Tribunal and Another [2023] ZAGPPHC 24.
Phaladi v Lamara 2018 3 SA 265 (WCC).
Standard Bank of SA Ltd v Sewpersadh Another 2005 (4) SA 148 (C).
Standard Bank of SA Ltd v Panayiotts (08/00146) [2009] ZAGPHC 22.
Walsh v Kruger 1965 (2) SA 756 (E).
American Case Law
Harris v Fort Oglethorpe State Bank (1983) 721 F. 2d 1052 (6 th Cir.).
In re Bradley (1982) 18 B.R. 105 (Bankr. D. Vt).
In re Caccamise (2009) WL 5205980, 3 (Bankr. E.D. Va).
In re Computer Communications, Inc. (1987) 824 F. 2d).
In re Harris (1982) 16 B.R. 371).
In re Humphrey (2004) 310 B.R. 735 (Bankr. W.D. Mo).
In re Moore (2019) 602 B.R. 40 (Bankr. E.D. Tenn).
In re Nesser (1997) 206 B.R. 357 (Bankr. W.D. Pa).
In re Zersen (1995) 189 B.R. 732 (Bankr. W.D. Wis).
Mann v Chase Manhattan Mortg. Corp., (2003) 316 F. 3d 1, 3, 40 Bankr. Ct. Dec. (CRR) 189, 49 Collier
Bankr. Cas. 2d (MB) 1715, Bankr. L. Rep. (CCH) P 78787 (1 st Cir.).
Pearson (1985) 773 F.2d 751, 753, 13 Collier Bankr. Cas. 2d (MB) 749, Bankr. L. Rep. (CCH) P 70787
(6th Cir.)
Legislation
South African Legislation
Insolvency Act 24 of 1936.
National Credit Act 34 of 2005.
National Credit Amendment Act 19 of 2014.
US Legislation
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
Bankruptcy Reform Act of 1978 (P.L. 103-394, 107 Stat. 4106).
Small Business Reorganization Act of 2019 [Public Law 116–54].
United States of America, Bankruptcy Code, Pub. L. 95-598, Title 1, 11 U.S.C. 101, 6 November 1978,
Stat.2549.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 Howard Chitimira
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
The author fully assumes the content originality and the holograph signature makes him responsible in case of trial.
