Overview of business rescue in South Africa - the context, process, and stakeholders

Business rescue implications for creditors

This page will discuss rights and protection of creditors in Chapter 6 business rescue.

Advice to banks on the commencement of business rescue

Section 129: Company resolution to begin business rescue proceedings

Voluntarily section 129 business rescue commencement via filing a company resolution is quicker and cheaper than compulsory section 131 business rescue commencement via application for a court order by an affected person.

At CRS Business Rescue, we don't recommend unilateral Section 129 business rescue commencement by companies. We believe that companies in financial distress should share their plans with their banks, and that business rescue commencement, with an agreed-upon business rescue practitioner, should be jointly planned.

Banks should therefore encourage its clients to share their plans for section 129 business rescue commencement with them, for purposes of:

The bank agreeing on business rescue, and not opposing the filing of business rescue resolution in terms of Section 130: Objections to company resolution.
The bank agreeing with the choice of business rescue practitioner beforehand, and not opposing the appointment of the business rescue practitioner in terms of Section 130: Objections to company resolution.

Section 131: Court order to begin business rescue proceedings

A bank may decide that a client in financial distress is economically viable and that the bank is better off if the client is placed in business rescue rather than being liquidated.

Instead of following the more cumbersome and expensive compulsory section 131 commencement route by the bank as an affected person, the bank may prefer to convince the board of directors of its client to rather:

Agree on a business rescue practitioner beforehand, and then
For the board to initiate a voluntarily section 129 business rescue via filing a company resolution with CIPC.

References

Academic journals

Bradstreet, R. (2011). The New Business Rescue: Will Creditors Sink or Swim? South African Law Journal, 128(2), 352-380. (Accessible through Sabinet).

Solomons, P., & Boltar, J. (2009). Section 136(2) of the Companies Act, 2008 - Potentially Drastic Consequences Company Law. Without Prejudice, 9(8), pp. 26-29. (Accessible through Sabinet).

Professional publications

Moosa, R. (2009, March). Business Rescue: The Challenges. Deneys Reitz Attorneys.

Presentations

Taggart, R. (2010, August 11). Impact and Consequences of Business Rescue Provisions (Chapter 6) on Bank Lending Facilities. Presented at the Turnaround Management Association - Southern Africa Lecture Series.

Professional web sites

King, B. (2010, October 21). Good News for the Derivatives Business in South Africa. Deneys Reitz Attorneys.

Driver, G. (2010). Business Rescue Provisions Could Jeopardise Creditors. Werksmans Attorneys.

Levenstein, E. (2010). Banks Must Be Vigilant in New Business Rescue Regime. Werksmans Attorneys.

Moosa, R. (2009, October 6). Business Rescue: The Challenges. Deneys Reitz Attorneys..

So Where Does Business Rescue Leave Creditors? (2009, October 6). Deneys Reitz Attorneys.

Media articles

Business Rescue Act A Concern. (2010, June 3). Cape Business News.

De Bruin, P. (2009, October 21). Law to 'Rescue' Struggling Firms. Fin24.

Firms' Distress Could Cost Landlords. (2010, September 14). Property24.com.

Fraser, G. (2010, August 19). You May Be Right - but You May Be Wrong, Too! Legalbrief.

Iodsa: Statement by the Institute of Directors South Africa on Changes in the Draft Companies Amendment Bill. (2010, August 30). Polity.org.za.

King, B. (2010, August 10). Business Rescue Curbs up for Debate. Business Day.

New Act 'a Concern for Creditors'. (2010, June 3). MSN News.

SA`s New Property Law Shocker. (2008, July 24). Realestateweb.

Temkin, S. (2010, August 31). Relief for Creditors in New Rescue Law. Business Day.

Visser, A. (2010, August 10). 'Short Circuit' in Companies Act. Fin24.