In-depth analysis of the business rescue provisions contained in Chapter 6 of the Companies Act No. 71 of 2008 and the Companies Amendment Act No. 3 of 2011

Section 128: Application and definitions applicable to Chapter 6

as amended by section 81 of the Companies Amendment Act No. 3 of 2011

(1) In this Chapter—

(a) ‘‘affected person’’, in relation to a company, means—

(i) a shareholder or creditor of the company;

(ii) any registered trade union representing employees of the company; and

(iii) if any of the employees of the company are not represented by a registered trade union, each of those employees or their respective representatives;

(b) ‘‘business rescue’’ means proceedings to facilitate the rehabilitation of a company that is financially distressed by providing for—

(i) the temporary supervision of the company, and of the management of its affairs, business and property;

(ii) a temporary moratorium on the rights of claimants against the company or in respect of property in its possession; and

(iii) the development and implementation, if approved, of a plan to rescue the company by restructuring its affairs, business, property, debt and other liabilities, and equity in a manner that maximises the likelihood of the company continuing in existence on a solvent basis or, if it is not possible for the company to so continue in existence, results in a better return for the company’s creditors or shareholders than would result from the immediate liquidation of the company;

(c) ‘‘business rescue plan’’ means a plan contemplated in section 150;

(d) ‘‘business rescue practitioner’’ means a person appointed, or two or more persons appointed jointly, in terms of this Chapter to oversee a company during business rescue proceedings and ‘practitioner’ has a corresponding meaning;

(e) ‘‘court’’, depending on the context, means either—

(i) the High Court that has jurisdiction over the matter; or

(ii) either—

(aa) a designated judge of the High Court that has jurisdiction over the matter, if the Judge President has designated any judges in terms of subsection (3); or

(bb) a judge of the High Court that has jurisdiction over the matter, as assigned by the Judge President to hear the particular matter, if the Judge President has not designated any judges in terms of subsection (3);

(f) ‘‘financially distressed’’, in reference to a particular company at any particular time, means that—

(i) it appears to be reasonably unlikely that the company will be able to pay all of its debts as they become due and payable within the immediately ensuing six months; or

(ii) it appears to be reasonably likely that the company will become insolvent within the immediately ensuing six months;

(g) ‘‘independent creditor’’ means a person who—

(i) is a creditor of the company, including an employee of the company who is a creditor in terms of section 144(2); and

(ii) is not related to the company, a director, or the practitioner, subject to subsection (2);

(h) ‘‘rescuing the company’’ means achieving the goals set out in the definition of ‘‘business rescue’’ in paragraph (b);

(i) ‘‘supervision’’ means the oversight imposed on a company during its business rescue proceedings; and

(j) ‘‘voting interest’’ means an interest as recognised, appraised and valued in terms of section 145(4) to (6).

(2) For the purpose of subsection (1)(g), an employee of a company is not related to that company solely as a result of being a member of a trade union that holds securities of that company.

(3) For the purposes contemplated in subsection (1)(e) or in any other law, the Judge President of a High Court may designate any judge of that court generally as a specialist to determine issues relating to commercial matters, commercial insolvencies and business rescue.

Any reference to "company" in Chapter 6 is applicable to a"close corporation" too.

Schedule 3: Amendment of laws

6. Rescue of financially distressed close corporations

Amendment of section 66 of Act 69 of 1984, as substituted by section 16 of Act 26 of 1997

(1) Section 66 of the Close Corporations Act is hereby amended by the insertion of the following subsection after subsection (1):

‘‘(1A) The provisions of Chapter 6 of the Companies Act, read with the changes required by the context, apply to a corporation, but any reference in that Chapter to—

(a) a company must be regarded as a reference to a corporation; or

(b) a shareholder of a company, or the holder of securities issued by a company, must be read as a reference to a member of a corporation.’’.