Real Estate Investor Magazine South Africa May/June 2019 | Page 60

LEGAL
Post commencement funding
for property owners
Will recently proposed amendments to the
Companies Act make it harder to raise?
BY LARA KAHN & RYAN SMITH
R
ecent proposals to amend sections 134 and 135 of the
Companies Act includes changes which may have the
effect of unfairly benefiting landlords and other lessors of
property (who are proposed to be considered as post commence-
ment finance (PCF) providers) to the detriment of other PCF
providers, namely lenders. The unintended consequence that the
proposed amendments may have is that it will be even harder for
business rescue practitioners to raise PCF. Given the position of
PCF providers and their rights in the business rescue proceed-
ings; the legislature needs to carefully reconsider these proposed
amendments and clarify the many questions that they raise, in or-
der to ensure that a successful business rescue process is not made
more difficult to achieve.
The proposed amendments are as follows:
Section 135 of the principal Act is hereby amended -
(a) by the insertion after subsection (1) of the following
subsection:
"(1A) To the extent that any amounts due company to any
owner of the property, including a landlord in respect of any
property of such owner or landlord which is the subject of a
contract with a company that is placed in business rescue is not
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MAY/JUNE 2019 SA Real Estate Investor Magazine
paid to such owner or landlord during business rescue by the
company from the date that the company is placed in business
rescue proceedings, provided that such amounts do not exceed the
aggregate of all disbursements and outgoings, including rates and
taxes, electricity and water, paid by such owner or landlord to third
parties during the period referred to in this section, the money
must be regarded as post-commencement financing that must be
paid to such owner in the order set out in subsection (3 )(b).";
(b) by the substitution in subsection (3) for the words preceding
paragraph (a) of the following words:
"After payment of the practitioner's remuneration and expenses
referred to in section 143, post-commencement finance, rental
payment and other claims arising out of the costs of the business
rescue proceedings, all claims contemplated -"; and
(c) by the substitution in subsection (3)(a) for the words
preceding subparagraph (i) of the following words:
"in subsection (1) and subsection (1A) will be treated equally,
but will have preference over-".
Section 145 of the principal Act is hereby amended -
(a) by the deletion in subsection (4) of the word "and" at the
end of paragraph (a) and by the substitution in that subsection