The impact of the capacity provisions in the Companies Act 71 of 2008 on the insolvency-remoteness of limited capacity special purpose vehicles used in securitisation schemes

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dc.contributor.authorEtienne A, Olivier
dc.date.accessioned2021-06-02T11:47:31Z
dc.date.available2021-06-02T11:47:31Z
dc.date.issued2020
dc.description.abstractThe insolvency-remoteness of a special purpose vehicle (SPV) used in a securitisation scheme is of critical importance, because insolvency of the SPV can interrupt the payment streams due to the investors in such schemes. Several contractual methods are implemented to achieve insolvency-remoteness. In this article, it is argued that pacta de non petendo (non-petition clauses), limited recourse provisions, and subordination clauses, all common insolvency-remoteness provisions, do not violate public policy. It is also argued that the capacity provisions in the Companies Act 71 of 2008 (the Act) do not reduce the insolvency risk of a limited capacity SPV used in a securitisation scheme. The fact that ultra vires contracts concluded by limited capacity companies will be provisionally valid under the Act means that provisions in a company’s MOI that limit a company’s capacity will have very little external significance. It is argued that the right to restrain ultra vires contracts in terms of s 20(5) of the Act, in conjunction with the right to ratify such actions in terms of s 20(2), do not provide reliable legal certainty or protection to the investors in assets securitised through a limited capacity SPV. ACCESS ARTICLE AT: https://doi.org/10.47348/JCCL/V6/i2a3en_US
dc.identifier.citationJournal of Corporate and Commercial Law & Practice, Volume 6 Issue 2, 2020, p. 82 – 111. DOI: https://doi.org/10.47348/JCCL/V6/i2a3en_US
dc.identifier.issn2521-2575
dc.identifier.urihttps://doi.org/10.47348/JCCL/V6/i2a3
dc.identifier.urihttp://hdl.handle.net/10566/6238
dc.language.isoenen_US
dc.publisherJutaen_US
dc.subjectspecial purpose vehicle (SPV)en_US
dc.subjectCompanies Act 71 of 2008en_US
dc.subjectpacta de non petendoen_US
dc.subjectultra vires contractsen_US
dc.subjectinsolvencyen_US
dc.titleThe impact of the capacity provisions in the Companies Act 71 of 2008 on the insolvency-remoteness of limited capacity special purpose vehicles used in securitisation schemesen_US
dc.typeArticleen_US

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