Insolvency Amendment Act [No. 33 of 2002]


Government Gazette
REPUBLIC OF SOUTH AFRICA

Vol. 449 Cape Town 6 November 2002 No. 24026
THE PRESIDENCY No. 1388 6 November 2002 It is hereby notified that the President has
assented to the following Act, which is hereby published for general information:–
No. 33 of 2002: Insolvency Amendment Act, 2002.


2 No. 24026 GOVERNMENT G.4ZElTE, 6 NOVEMBER 2002
Act No. 33,2002 INSOLVENCY AMENDMENT ACT, 2002
GENERAL EXPLANATORY NOTE: ~-
[ ] Words in bold type in square brackets indicate omissions from existing enactments.
Words underlined with a solid line indicate insertions in existing enactments.
(English text signed by the President.) (Assented to 28 October 2002.)
ACT To amend the Insolvency Act, 1936, so as to further regulate the effect of sequestration on employment contracts and claims for severance and retrench- ment pay; and to provide for matters incidental thereto.
E IT ENACTED by the Parliament of the Republic of South Africa, as follows:--
Substitution of section 38 of Act 24 of 1936
1. The following section is hereby substituted for section 38 of the Insolvency Act, 1936 (hereafter referred to as the principal Act):
“Effect of sequestration on contract of service
38. (1) The contracts of service of employees whose employer has been sequestrated are suspended with effect from the date of the granting of a sequestration order.
(2) Without limiting subsection (I), during the period of suspension of a contract of service referred to in subsection (1)- (a ) an employee whose contract is suspended is not required to render
services in terms of the contract and is not entitled to any remuneration in terms of the contract; and
(b) no employment benefit accrues to an employee in terms of the contract of service which is suspended.
(3) An employee whose contract of service is suspended is entitled to unemployment benefits i n terms of section 35 of the Unemployment Insurance Act, 1966 (Act No. 30 of 1966), from the date of such suspension, subject to the provisions of that Act.
(4) A trustee appointed in terms of section 56, or a liquidator appointed in terms o f section 375 of the Companies Act, 1973 (Act No. 61 of 1973), o r a liquidator who, i n t e r m of section 73 of the Close Corporations Act, 1984 (Act No. 69 of 1983). remains in office after the first meeting and a co-liquidator, if any, appointed by the Master may terminatc the contracts of service of employees, subject to subsections (5) and (7).
(5) Atrustee may not tertninate a contract of service unless the trustee has consulted with- (a) any person with \bhom the insolvent employer was required t o consult,
immediately before the sequestration, in terms of a collective agreement defined in section 213 of the Labour Relations Act, 1995 (Act No. 66 of 1995);
c
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Act No. 33,2002 INSOI>VVENCY AMENDMENT ACT, 2002 ____
(6) (i) a workplace forum defined in section 213 of the Labour Relations
(ii) any registered trade union whose members are likely to be
if there is no such collective agreement that existed immediately prior to the sequestration;
(c) a registered trade union representing employees whose contracts of service were suspended in terms of subsection (1) and who are likely to be affected by the termination of the contract of service, if there is no such workplace forum; or
(d) the employees whose contracts of service were suspendcd in terms of subsection (1) and who are likely to be affected by the termination of the contract of service or their representatives nominated for that purpose, if there is no such trade union.
(6) The consultation referred to in subsection (5) must be- aimed at reaching consensus on appropriate measures to save or rescue the whole or part of the business of the insolvent employer- (a) by the sale of the whole or part of the business of the insolvent
(b) by a transfer as contemplated in section 197A of the Labour Relations
(c) by a scheme or compromise referred to in section 31 I of the
(d) in any other manner. (7) If any party referred to in subsection (5) wishes to make proposals
concerning any matter contemplated in subsection (6), that party must submit written proposals to the trustee or liquidator within 21 days of the appointment of the trustee in terms of section 56, or the appointment of the liquidator in terms of section 375 of the Companies Act, 1973, or the appointment of a co-liquidator in terms of section 74 of the Close Corporations Act, 1984, or if a co-liquidator is not appointed, the date of the conclusion of the first meeting, unless the trustee or liquidator and an employee agree otherwise.
(8) A creditor of the insolvent employer may, with the consent of the trustee, participate in any consultation contemplated in this section.
(9) Unless the trustee or liquidator and an employee have agreed on continued employment of the employee in view of measures contemplated in subsection (6), all suspended contracts of service shall terminate 45 days after- (a) the date of the appointment of a trustee in terms of section 56; or (b) the date of the appointment of a liquidator in terms of section 375 of
the Companies Act. 1973; or (c) the date of the appointment of a co-liquidator in t e r m of section 74 of
the Close Corporations Act, 1984, or if a co-liquitlator is not appointed, the date of the conclusion of the first meeting.
Act, 1995; and
affected by the termination of the contract of service,
employer; or
Act, 1995; or
Companies Act, 1973; or
(10) An employee whose contract of service has been- (a) suspended in terms of subsection (1); or (6) terminated in terms of subsection (4) or (9), is entitled to claim compensation from the insolvent estate of his or her former employer for loss suffered by reason of the suspen5ion or termination of a contract of service prior to its expiration.
(11) An employee whose contract of service terminates 01- has been terminated in terms of this section is entitled to claim se~er:lnce benefits from the estate of the insolvent cmulover in accordance with section 41 of
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the Basic Conditions of Employment Act: 1997 (Act No. 75 of I997).". 55
Amendment of section 98A of Act 23 of 1936
l - 2. Section 98A of' the principal Act i s hereby amended by the whxtitution lor
paragr-aph (iv) of subsection (1)(u) of the l'ollowing subparagraph:
I . - -
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Act No. 33,2002 INSOLVENCY AMENDMENT ACT, 2002
“(iv) any severance or retrenchment pay due to the employee in terms of any law, agreement, contract, [or] wage-regulating measure, or as aresult of termination in terms of section 38; and”.
Short title and commencement
-3. (1) This Act shall be called the Insolvency Amendment Act, 2002, and shall come 5 into operation on 1 January 2003 or such earlier date as the President may determine by proclamation in the Gazette.
(2) This Act applies in respect of estates which-are sequestrated or provisionally sequestrated on or after the date of commencement of this Act.