Exam (elaborations)
MCL5903 January February Portfolio 2024 (COMPLETE ANSWERS) - DUE 19 January 2024
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- MCL5903
- Institution
- University Of South Africa
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MCL5903 January FebruaryPortfolio 2024 (COMPLETE
ANSWERS) - DUE 19
January 2024
Question 1 (20 marks) Best Bank Ltd institutes an application for winding-up of
Getaway Trucking (Pty) Ltd (‘Getaway’). The winding-up application is based
upon a ‘without prejudice’ letter of reply from Getaway to a letter of demand by
Best Bank Ltd. In terms of the letter of demand, Best Bank Ltd is seeking payment
of arrears under the loan agreement. The letter of reply from Getaway specifically
states that ‘the company will tender payment only if there were surplus funds
available for repayment of arrears.’ Getaway denies that it is commercially
insolvent. Getaway further says that in terms of the loan agreement entered with
Best Bank Ltd, part of the debt giving rise to the winding-up application was
extinguished by prescription. Lastly, Getaway argues that the remainder of the debt
was not yet due and payable as it had been subordinated to the debts of other
creditors of the company by agreement between the parties. Therefore, according
to Getaway, it was not indebted to Best Bank Ltd. You are appointed the legal
adviser of Best Bank Ltd, and must provide advice on the legal position of Best
Bank Ltd regarding the following matters:
a. The laws specifically applicable should Getaway be wound up and the reasons
for the application of such laws.
In the scenario described, it appears that Best Bank Ltd is seeking to wind up
Getaway Trucking (Pty) Ltd based on a 'without prejudice' letter of reply from
Getaway to a letter of demand regarding arrears under a loan agreement. As the
legal adviser for Best Bank Ltd, here are the legal considerations:
1. Companies Act and Winding-Up Laws:
The primary legislation governing winding-up applications in many
jurisdictions is the Companies Act or similar legislation. You should
examine the specific provisions of the Companies Act applicable to
, the jurisdiction where Getaway Trucking (Pty) Ltd operates. This will
outline the legal grounds and procedures for winding up a company.
2. Commercial Insolvency:
Best Bank Ltd must consider the commercial solvency of Getaway
Trucking. If Getaway is commercially insolvent, it may provide a
basis for the winding-up application. Commercial insolvency is
typically defined in the Companies Act and involves the inability of a
company to pay its debts.
3. Prescription Laws:
Getaway argues that part of the debt has been extinguished by
prescription. Prescription laws determine the time limits within which
legal actions, including debt recovery, can be pursued. Best Bank Ltd
should assess the relevant prescription laws to determine the validity
of Getaway's claim.
4. Debt Subordination Agreement:
If Getaway asserts that the debt is subordinated to the debts of other
creditors by agreement, Best Bank Ltd should review the terms of the
loan agreement. The agreement may contain provisions related to
subordination, and adherence to these terms will be crucial in
assessing the validity of Getaway's defense.
5. Due and Payable Status:
Getaway contends that the remainder of the debt is not yet due and
payable due to subordination. Best Bank Ltd should analyze the terms
of the loan agreement and the subordination agreement to confirm
whether the debt is genuinely not due or if Getaway's claim is
unfounded.
6. Court Procedures:
Familiarize yourself with the court procedures for winding-up
applications. This may involve filing a petition with the court, serving
notice to Getaway, and attending court hearings. Ensure compliance
with procedural requirements outlined in the Companies Act.
7. Evidence and Documentation:
Collect and organize evidence supporting Best Bank Ltd's claim for
arrears under the loan agreement. This may include the original loan
agreement, the 'without prejudice' letter, and any relevant
communication between the parties.
8. Legal Representation:
, Best Bank Ltd should engage legal representation familiar with
corporate and insolvency law to ensure a comprehensive and effective
presentation of its case.
It is crucial to seek legal advice specific to the jurisdiction involved, as the
applicable laws and procedures may vary.
(5) b. Whether Best Bank Ltd has the locus standi to institute winding-up
proceedings against Getaway based on a subordinated claim.
Locus standi refers to the legal standing or the right to bring a case or legal action.
In the context of winding-up proceedings against Getaway based on a subordinated
claim, the determination of Best Bank Ltd's locus standi would depend on the
terms of the loan agreement and the subordination agreement. Here are key
considerations:
1. Terms of the Loan Agreement:
Examine the loan agreement between Best Bank Ltd and Getaway.
Determine whether the agreement contains provisions that address the
bank's right to bring winding-up proceedings in the event of default,
including a default resulting from subordination.
2. Subordination Agreement:
Review the terms of the subordination agreement, if any. This
agreement likely outlines the hierarchy of creditors and the
subordination of Best Bank Ltd's claim to other creditors. Assess
whether the subordination agreement includes any limitations on Best
Bank Ltd's ability to initiate winding-up proceedings.
3. Consent or Conditions:
Check if the subordination agreement requires consent or specific
conditions to be met before Best Bank Ltd can initiate winding-up
proceedings. Some subordination agreements may impose restrictions
or prerequisites on taking legal action.
4. Compliance with Agreement:
Ensure that Best Bank Ltd has complied with all the terms and
conditions specified in the loan agreement and subordination
agreement. Failure to adhere to these terms may impact the bank's
locus standi.
5. Legal Advice:
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