087 237 9752
083 629 6860

Must you simply accept it if the company commences with business rescue proceedings?

January 8, 2017

Creditors regularly perceive companies, which commence with business rescue proceedings, do so purely as a delaying tactic and a ploy to postpone the inevitable liquidation of the company.

Unfortunately Business Rescue Practitioners do accept their appointment and take on boarder line cases without proper assessment of the company’s financial affairs – only to realise at a later stage during the process, that there is no reasonable prospect for the company to be rescued. Section 141 of the Companies Act clearly stipulates that under these circumstances the practitioner must terminate the process and liquidate the company.

However it is not just the practitioner who may terminate the business rescue proceedings. In terms of Section 130, an affected person who believes that the process is being abused, may between the adoption of a resolution and the Business Rescue Plan being adopted, apply to court for an order:

A – Setting aside the resolution on the grounds that either:

  • the company is not in financial destress; or
  • there are no reasonable prospect for the company to be rescued; or
  • the procedures, such as filing and time periods, were not complied with.

B – Setting aside the appointment of the Business Rescue Practitioner on the grounds that either:

  • he does not satisfy the requirements stipulated in the Companies act; or
  • he is not independent of the company or its management; or
  • he does not satisfy skill requirements relative to the company’s circumstances.

C – Requiring the practitioner to provide security in an amount and on terms and conditions that the court considers necessary to secure the interests of the company and any affected person.

Finally, a creditor of the company in business rescue can also demonstrate his objection by voting against the business rescue plan tabled at the second meeting of creditors. The plan can only be adopted by means of a 75% vote in favour of such adoption.

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances