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How to recover property in business rescue

June 7, 2021

Whether being leased premises, machinery, or equipment necessary to conduct business, it is trite that companies in business rescue may have in their possession property belonging to another. The effect of this is that if such property is lawfully in the possession of the company in business rescue, then its owner is precluded from instituting legal proceedings in relation to the property and is precluded from exercising any rights in respect of such property.

In most instances, the owner has a contract with the company to utilise and possess such property. Upon the commencement of business rescue, the business rescue practitioner (BRP) will send out a letter suspending the company’s contractual obligations. This further prevents the owner from cancelling the contract and taking possession of the property.
Therefore if an owner wishes to recover its property, it must cancel the contract with the company provided that the company is in default and a letter of suspension has not been sent off by the BRP. This will have the effect of making the company’s continued possession of the property unlawful. Thereafter the company loses the moratorium protection and vindicatory proceedings may be instituted against it.

If, however, the contract cannot be lawfully canceled or the BRP has suspended the contractual obligations of the company but the property owner still wishes to recover its property, then the property owner may request written consent from the BRP, which consent may not be unreasonably withheld, taking into account inter alia the circumstances of the company.
Alternatively, the property owner may request written consent from the BRP to institute legal proceedings or request the court to lift the legal moratorium enjoyed by a company.
Therefor property owners are advised to act swiftly as soon as they realise that the lessee is in financial distress or alternatively, contracts must be amended so as to include a clause making possession of the property unlawful upon commencing with business rescue.

Disclaimer: The contents and information provided above are generalised and must not be acted upon as legal advice