Companies Act, 2008

CHAP­TER 6

BUSI­NESS RES­CUE AND COM­PRO­MISE WITH CREDITORS

Part

Busi­ness res­cue proceedings

Appli­ca­tion and def­i­n­i­tions applic­a­ble to Chap­ter 6

128. (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 10 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 15 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 20 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; 25

© ‘‘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; 30

(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 35 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); 40

(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 fall due and payable within the imme­di­ately ensu­ing six months; or 45
(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 50 (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 55 busi­ness res­cue pro­ceed­ings; and

232

(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)(f), 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 shares of
that com­pany. 5 (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.

Com­pany res­o­lu­tion to begin busi­ness res­cue pro­ceed­ings 10

129. (1) Sub­ject to sub­sec­tion (2)(a), the board of a com­pany may resolve that the com­pany vol­un­tar­ily begin busi­ness res­cue pro­ceed­ings and place the com­pany under super­vi­sion, if the board has rea­son­able grounds to believe that—

(a) the com­pany is finan­cially dis­tressed; and

(b) there appears to be a rea­son­able prospect of res­cu­ing the com­pany. 15 (2) A res­o­lu­tion con­tem­plated in sub­sec­tion (1)—

(a) may not be adopted if liq­ui­da­tion pro­ceed­ings have been ini­ti­ated by or against the com­pany; and

(b) has no force or effect until it has been filed.

(3) Within five busi­ness days after a com­pany has adopted and filed a res­o­lu­tion, as 20 con­tem­plated in sub­sec­tion (1), or such longer time as the Com­mis­sion, on appli­ca­tion
by the com­pany, may allow, the com­pany must—

(a) pub­lish a notice of the res­o­lu­tion, and its effec­tive date, in the pre­scribed man­ner to every affected per­son, includ­ing with the notice a sworn statement

of the facts rel­e­vant to the grounds on which the board res­o­lu­tion was 25 founded; and

(b) appoint a busi­ness res­cue prac­ti­tioner who sat­is­fies the require­ments of sec­tion 138, and who has con­sented in writ­ing to accept the appointment.

(4) After appoint­ing a prac­ti­tioner as required by sub­sec­tion (3)(b), a com­pany must— 30

(a) file a notice of the appoint­ment of a prac­ti­tioner within two busi­ness days after mak­ing the appoint­ment; and

(b) pub­lish a copy of the notice of appoint­ment to each affected per­son within five busi­ness days after the notice was filed.

(5) If a com­pany fails to com­ply with any pro­vi­sion of sub­sec­tion (3) or (4)— 35

(a) its res­o­lu­tion to begin busi­ness res­cue pro­ceed­ings and place the com­pany under super­vi­sion lapses and is a nul­lity; and

(b) the com­pany may not file a fur­ther res­o­lu­tion con­tem­plated in sub­sec­tion (1) for a period of three months after the date on which the lapsed res­o­lu­tion was adopted, unless a court, on good cause shown on an ex parte appli­ca­tion, 40 approves the com­pany fil­ing a fur­ther resolution.

(6) A com­pany that has adopted a res­o­lu­tion con­tem­plated in this sec­tion may not adopt a res­o­lu­tion to begin liq­ui­da­tion pro­ceed­ings, unless the res­o­lu­tion has lapsed in terms of sub­sec­tion (5), or until the busi­ness res­cue pro­ceed­ings have ended as deter­mined in accor­dance with sec­tion 132(2). 45
(7) If the board of a com­pany has rea­son­able grounds to believe that the com­pany is finan­cially dis­tressed, but the board has not adopted a res­o­lu­tion con­tem­plated in this sec­tion, the board must deliver a writ­ten notice to each affected per­son, set­ting out the cri­te­ria referred to in sec­tion 128(1)(e) that are applic­a­ble to the com­pany, and its rea­sons for not adopt­ing a res­o­lu­tion con­tem­plated in this sec­tion. 50

Objec­tions to com­pany resolution

130. (1) Sub­ject to sub­sec­tion (2), at any time after the adop­tion of a res­o­lu­tion in terms of sec­tion 129, until the adop­tion of a busi­ness res­cue plan in terms of sec­tion 152, an affected per­son may apply to a court for an order—

(a) set­ting aside the res­o­lu­tion, on the grounds that— 55 (i) there is no rea­son­able basis for believ­ing that the com­pany is financially

dis­tressed;
234
(ii) there is no rea­son­able prospect for res­cu­ing the com­pany; or
(iii) the com­pany has failed to sat­isfy the pro­ce­dural require­ments set out in sec­tion 129;

(b) set­ting aside the appoint­ment of the prac­ti­tioner, on the grounds that the prac­ti­tioner— 5 (i) does not sat­isfy the require­ments of sec­tion 138;

(ii) is not inde­pen­dent of the com­pany or its man­age­ment; or
(iii) lacks the nec­es­sary skills, hav­ing regard to the company’s cir­cum­stances;
or

© requir­ing the prac­ti­tioner to pro­vide secu­rity in an amount and on terms and 10 con­di­tions that the court con­sid­ers nec­es­sary to secure the inter­ests of the com­pany and any affected persons.

(2) An affected per­son who, as a direc­tor of a com­pany, voted in favour of a res­o­lu­tion con­tem­plated in sec­tion 129 may not apply to a court in terms of—

(a) sub­sec­tion (1)(a) to set aside that res­o­lu­tion; or 15

(b) sub­sec­tion (1)(b) to set aside the appoint­ment of the prac­ti­tioner appointed by the company,

unless that per­son sat­is­fies the court that the per­son, in sup­port­ing the res­o­lu­tion, acted in good faith on the basis of infor­ma­tion that has sub­se­quently been found to
be false or mis­lead­ing. 20 (3) An appli­cant in terms of sub­sec­tion (1) must—

(a) serve a copy of the appli­ca­tion on the com­pany and the Com­mis­sion; and

(b) notify each affected per­son of the appli­ca­tion in the pre­scribed manner.

(4) Each affected per­son has a right to par­tic­i­pate in the hear­ing of an appli­ca­tion in terms of this sec­tion. 25
(5) When con­sid­er­ing an appli­ca­tion in terms of sub­sec­tion (1)(a) to set aside the company’s res­o­lu­tion, the court may—

(a) set aside the resolution—

(i) on any grounds set out in sub­sec­tion (1); or
(ii) if, hav­ing regard to all of the evi­dence, the court con­sid­ers that it is 30 oth­er­wise just and equi­table to do so;

(b) afford the prac­ti­tioner suf­fi­cient time to form an opin­ion whether or not— (i) the com­pany appears to be finan­cially dis­tressed; or

(ii) there is a rea­son­able prospect of res­cu­ing the com­pany,
and after receiv­ing a report from the prac­ti­tioner, may set aside the company’s 35 res­o­lu­tion if the court con­cludes that the com­pany is not finan­cially dis­tressed,
or there is no rea­son­able prospect of res­cu­ing the com­pany; and

© if it makes an order under para­graph (a) or (b) set­ting aside the company’s res­o­lu­tion, may make any fur­ther nec­es­sary and appro­pri­ate order, includ– ing— 40 (i) an order plac­ing the com­pany under liq­ui­da­tion; or

(ii) if the court has found that there were no rea­son­able grounds for believ­ing that the com­pany would be unlikely to pay all of its debts as they became due and payable, an order of costs against any direc­tor who voted in
favour of the res­o­lu­tion to com­mence busi­ness res­cue pro­ceed­ings, 45 unless the court is sat­is­fied that the direc­tor acted in good faith and on the basis of infor­ma­tion that the direc­tor was enti­tled to rely upon in terms of sec­tion 76(4) and (5).
(6) If, after con­sid­er­ing an appli­ca­tion in terms of sub­sec­tion (1)(b), the court makes
an order set­ting aside the appoint­ment of a prac­ti­tioner— 50

(a) the court must appoint an alter­nate prac­ti­tioner who sat­is­fies the require­ments of sec­tion 138, rec­om­mended by, or accept­able to, the hold­ers of a major­ity of the inde­pen­dent cred­i­tors’ vot­ing inter­ests who were rep­re­sented in the hear­ing before the court; and

(b) the pro­vi­sions of sub­sec­tion (5)(b), if rel­e­vant, apply to the prac­ti­tioner 55 appointed in terms of para­graph (a).

Court order to begin busi­ness res­cue proceedings

131. (1) Unless a com­pany has adopted a res­o­lu­tion con­tem­plated in sec­tion 129, an affected per­son may apply to a court at any time for an order plac­ing the com­pany under super­vi­sion and com­menc­ing busi­ness res­cue pro­ceed­ings. 60

236
(2) An appli­cant in terms of sub­sec­tion (1) must—

(a) serve a copy of the appli­ca­tion on the com­pany and the Com­mis­sion; and

(b) notify each affected per­son of the appli­ca­tion in the pre­scribed manner.

(3) Each affected per­son has a right to par­tic­i­pate in the hear­ing of an appli­ca­tion in terms of this sec­tion. 5
(4) After con­sid­er­ing an appli­ca­tion in terms of sub­sec­tion (1), the court may—

(a) make an order plac­ing the com­pany under super­vi­sion and com­menc­ing busi­ness res­cue pro­ceed­ings, if the court is sat­is­fied that—

(i) the com­pany is finan­cially dis­tressed;
(ii) the com­pany has failed to pay over any amount in terms of an oblig­a­tion 10 under or in terms of a pub­lic reg­u­la­tion, or con­tract, with respect to employment-​related mat­ters; or
(iii) it is oth­er­wise just and equi­table to do so for finan­cial rea­sons, and there is a rea­son­able prospect for res­cu­ing the com­pany; or

(b) dis­miss­ing the appli­ca­tion, together with any fur­ther nec­es­sary and appro­pri– 15 ate order, includ­ing an order plac­ing the com­pany under liquidation.

(5) If the court makes an order in terms of sub­sec­tion (4)(a), the court may make a fur­ther order appoint­ing as interim prac­ti­tioner a per­son who sat­is­fies the require­ments of sec­tion 138, and who has been nom­i­nated by the affected per­son who applied in terms
of sub­sec­tion (1), sub­ject to rat­i­fi­ca­tion by the hold­ers of a major­ity of the inde­pen­dent 20 cred­i­tors’ vot­ing inter­ests at the first meet­ing of cred­i­tors, as con­tem­plated in sec­tion
147.
(6) If liq­ui­da­tion pro­ceed­ings have already been com­menced by or against the com­pany at the time an appli­ca­tion is made in terms of sub­sec­tion (1), the appli­ca­tion
will sus­pend those liq­ui­da­tion pro­ceed­ings until— 25

(a) the court has adju­di­cated upon the appli­ca­tion; or

(b) the busi­ness res­cue pro­ceed­ings end, if the court makes the order applied for. (7) In addi­tion to the pow­ers of a court on an appli­ca­tion con­tem­plated in this section,

a court may make an order con­tem­plated in sub­sec­tion (4), or (5) if applic­a­ble, at any
time dur­ing the course of any liq­ui­da­tion pro­ceed­ings or pro­ceed­ings to enforce any 30 secu­rity against the com­pany.
(8) A com­pany that has been placed under super­vi­sion in terms of this section—

(a) may not adopt a res­o­lu­tion plac­ing itself in liq­ui­da­tion until the busi­ness res­cue pro­ceed­ings have ended as deter­mined in accor­dance with section

132(2); and 35

(b) must notify each affected per­son of the order within five busi­ness days after the date of the order.

Dura­tion of busi­ness res­cue proceedings

132. (1) Busi­ness res­cue pro­ceed­ings begin when—

(a) the com­pany— 40 (i) files a res­o­lu­tion to place itself under super­vi­sion in terms of section

129(3); or
(ii) applies to the court for con­sent to file a res­o­lu­tion in terms of sec­tion
129(5)(b);

(b) a per­son applies to the court for an order plac­ing the com­pany under 45 super­vi­sion in terms of sec­tion 131(1); or

© dur­ing the course of liq­ui­da­tion pro­ceed­ings, or pro­ceed­ings to enforce a secu­rity inter­est, a court makes an order plac­ing the com­pany under supervision.

(2) Busi­ness res­cue pro­ceed­ings end when— 50

(a) the court—

(i) sets aside the res­o­lu­tion or order that began those pro­ceed­ings; or
(ii) has con­verted the pro­ceed­ings to liq­ui­da­tion proceedings;

(b) the prac­ti­tioner has filed with the Com­mis­sion a notice of the ter­mi­na­tion of busi­ness res­cue pro­ceed­ings; or 55

© a busi­ness res­cue plan has been—

(i) pro­posed and rejected in terms of Part D of this Chap­ter, and no affected per­son has acted to extend the pro­ceed­ings in any man­ner con­tem­plated in sec­tion 153; or
238
(ii) adopted in terms of Part D of this Chap­ter, and the prac­ti­tioner has sub­se­quently filed a notice of sub­stan­tial imple­men­ta­tion of that plan.
(3) If a company’s busi­ness res­cue pro­ceed­ings have not ended within three months after the start of those pro­ceed­ings, or such longer time as the court, on appli­ca­tion by
the prac­ti­tioner, may allow, the prac­ti­tioner must— 5

(a) pre­pare a report on the progress of the busi­ness res­cue pro­ceed­ings, and update it at the end of each sub­se­quent month until the end of those pro­ceed­ings; and

(b) deliver the report and each update in the pre­scribed man­ner to each affected per­son, and to the— 10 (i) court, if the pro­ceed­ings have been the sub­ject of a court order; or

(ii) Com­mis­sion, in any other case.

Gen­eral mora­to­rium on legal pro­ceed­ings against company

133. (1) Dur­ing busi­ness res­cue pro­ceed­ings, no legal pro­ceed­ing, includ­ing enforce­ment action, against the com­pany, or in rela­tion to any prop­erty belong­ing to the 15 com­pany, or law­fully in its pos­ses­sion, may be com­menced or pro­ceeded with in any forum, except—

(a) with the writ­ten con­sent of the practitioner;

(b) with the leave of the court and in accor­dance with any terms the court con­sid­ers suit­able; 20

© as a set-​off against any claim made by the com­pany in any legal pro­ceed­ings, irre­spec­tive whether those pro­ceed­ings com­menced before or after the busi­ness res­cue pro­ceed­ings began;

(d) crim­i­nal pro­ceed­ings against the com­pany or any of its direc­tors or offi­cers; or

(e) pro­ceed­ings con­cern­ing any prop­erty or right over which the com­pany 25 exer­cises the pow­ers of a trustee.

(2) Dur­ing busi­ness res­cue pro­ceed­ings, a guar­an­tee or surety by a com­pany in favour of any other per­son may not be enforced by any per­son against the com­pany except with leave of the court and in accor­dance with any terms the court con­sid­ers just and equi­table in the cir­cum­stances. 30
(3) If any right to com­mence pro­ceed­ings or oth­er­wise assert a claim against a com­pany is sub­ject to a time limit, the mea­sure­ment of that time must be sus­pended dur­ing the company’s busi­ness res­cue proceedings.

Pro­tec­tion of prop­erty interests

134. Sub­ject to sub­sec­tions (2) and (3), dur­ing a company’s busi­ness res­cue 35 proceedings—

(a) the com­pany may dis­pose, or agree to dis­pose, of prop­erty only— (i) in the ordi­nary course of its business;

(ii) in a bona fide trans­ac­tion at arm’s length for fair value approved in advance and in writ­ing by the prac­ti­tioner; or 40
(iii) in a trans­ac­tion con­tem­plated within, and under­taken as part of the imple­men­ta­tion of, a busi­ness res­cue plan that has been approved in terms of sec­tion 152;

(b) any per­son who, as a result of an agree­ment made in the ordi­nary course of the company’s busi­ness before the busi­ness res­cue pro­ceed­ings began, is in 45 law­ful pos­ses­sion of any prop­erty owned by the com­pany may con­tinue to exer­cise any right in respect of that prop­erty as con­tem­plated in that agree­ment, sub­ject to sec­tion 136; and

© despite any pro­vi­sion of an agree­ment to the con­trary, no per­son may exercise

any right in respect of any prop­erty in the law­ful pos­ses­sion of the com­pany, 50 irre­spec­tive whether the prop­erty is owned by the com­pany, except to the extent that the prac­ti­tioner con­sents in writ­ing.
(2) The prac­ti­tioner may not unrea­son­ably with­hold con­sent in terms of sub­sec­tion
(1)©, hav­ing regard to—

(a) the pur­poses of this Chap­ter; 55

(b) the cir­cum­stances of the com­pany; and

240

© the nature of the prop­erty, and the rights claimed in respect of it.

(3) If, dur­ing a company’s busi­ness res­cue pro­ceed­ings, the com­pany wishes to dis­pose of any prop­erty over which another per­son has any secu­rity or title inter­est, the com­pany must—

(a) obtain the prior con­sent of that other per­son, unless the pro­ceeds of the 5 dis­posal would be suf­fi­cient to fully dis­charge the indebt­ed­ness pro­tected by

that person’s secu­rity or title inter­est; and

(b) promptly—

(i) pay to that other per­son the sale pro­ceeds attrib­ut­able to that prop­erty up
to the amount of the company’s indebt­ed­ness to that other per­son; or 10 (ii) pro­vide secu­rity for the amount of those pro­ceeds, to the rea­son­able
sat­is­fac­tion of that other person.

Post-​commencement finance

135. (1) To the extent that any remu­ner­a­tion, reim­burse­ment for expenses or other amount of money relat­ing to employ­ment becomes due and payable by a com­pany to an 15 employee dur­ing the company’s busi­ness res­cue pro­ceed­ings, but is not paid to the employee—

(a) the money is regarded to be post-​commencement financ­ing; and

(b) will be paid in the order of pref­er­ence set out in sub­sec­tion (3)(a).

(2) Dur­ing its busi­ness res­cue pro­ceed­ings, the com­pany may obtain financ­ing other 20 than as con­tem­plated is sub­sec­tion (1), and any such financing—

(a) may be secured to the lender by util­is­ing any asset of the com­pany to the extent that it is not oth­er­wise encum­bered; and

(b) will be paid in the order of pref­er­ence set out in sub­sec­tion (3)(b).

(3) After pay­ment of the practitioner’s remu­ner­a­tion and costs referred to in sec­tion 25
143, and other claims aris­ing out of the costs of the busi­ness res­cue pro­ceed­ings, all claims contemplated—

(a) in sub­sec­tion (1) will be treated equally, but will have pref­er­ence over—

(i) all claims con­tem­plated in sub­sec­tion (2), irre­spec­tive whether or not
they are secured; and 30 (ii) all unse­cured claims against the com­pany; or

(b) in sub­sec­tion (2) will have pref­er­ence in the order in which they were incurred over all unse­cured claims against the company.

(4) If busi­ness res­cue pro­ceed­ings are super­seded by a liq­ui­da­tion order, the pref­er­ence con­ferred in terms of this sec­tion will remain in force, except to the extent of 35 any claims aris­ing out of the costs of liquidation.

Effect of busi­ness res­cue on employ­ees and contracts

136. (1) Despite any pro­vi­sion of an agree­ment to the contrary—

(a) dur­ing a company’s busi­ness res­cue pro­ceed­ings employ­ees of the com­pany imme­di­ately before the begin­ning of those pro­ceed­ings con­tinue to be so 40 employed on the same terms and con­di­tions, except to the extent that—

(i) changes occur in the ordi­nary course of attri­tion; or
(ii) the employ­ees and the com­pany, in accor­dance with applic­a­ble labour laws, agree dif­fer­ent terms and con­di­tions; and

(b) any retrench­ment of any such employ­ees con­tem­plated in the company’s 45 busi­ness res­cue plan is sub­ject to sec­tion 189 and 189A of the Labour Rela­tions Act, 1995 (Act No. 66 of 1995), and other applic­a­ble employ­ment related legislation.

(2) Sub­ject to sec­tions 35A and 35B of the Insol­vency Act, 1936 (Act No. 24 of 1936), despite any pro­vi­sion of an agree­ment to the con­trary, dur­ing busi­ness res­cue 50 pro­ceed­ings, the prac­ti­tioner may can­cel or sus­pend entirely, par­tially or con­di­tion­ally
any pro­vi­sion of an agree­ment to which the com­pany is a party at the com­mence­ment of the busi­ness res­cue period, other than an agree­ment of employ­ment.
242
(3) Any party to an agree­ment that has been sus­pended or can­celled, or any pro­vi­sion which has been sus­pended or can­celled, in terms of sub­sec­tion (2), may assert a claim against the com­pany only for dam­ages.
(4) If liq­ui­da­tion pro­ceed­ings have been con­verted into busi­ness res­cue pro­ceed­ings,
the liq­uida­tor is a cred­i­tor of the com­pany to the extent of any out­stand­ing claim by the 5 liq­uida­tor for any remu­ner­a­tion due for work per­formed, or com­pen­sa­tion for expenses incurred, before the busi­ness res­cue pro­ceed­ings began.

Effect on share­hold­ers and directors

137. (1) Dur­ing busi­ness res­cue pro­ceed­ings an alter­ation in the clas­si­fi­ca­tion or sta­tus of any issued secu­ri­ties of a com­pany, other than by way of a trans­fer of secu­ri­ties 10 in the ordi­nary course of busi­ness, is invalid except to the extent—

(a) that the court oth­er­wise directs; or

(b) con­tem­plated in an approved busi­ness res­cue plan.

(2) Dur­ing a company’s busi­ness res­cue pro­ceed­ings, each direc­tor of the company—

(a) must con­tinue to exer­cise the func­tions of direc­tor, sub­ject to the author­ity of 15 the practitioner;

(b) has a duty to the com­pany to exer­cise any man­age­ment func­tion within the com­pany in accor­dance with the express instruc­tions or direc­tion of the prac­ti­tioner, to the extent that it is rea­son­able to do so;

© remains bound by the require­ments of sec­tion 75 con­cern­ing per­sonal 20

finan­cial inter­ests of the direc­tor or a related per­son; and

(d) to the extent that the direc­tor acts in accor­dance with para­graphs (b) and ©, is relieved from the duties of a direc­tor as set out in sec­tion 76, and the lia­bil­i­ties set out in sec­tion 77, other than sec­tion 77(3)(a), (b) and ©.

(3) Dur­ing a company’s busi­ness res­cue pro­ceed­ings, each direc­tor of the com­pany 25 must attend to the requests of the prac­ti­tioner at all times, and pro­vide the prac­ti­tioner
with any infor­ma­tion about the company’s affairs as may rea­son­ably be required.
(4) If, dur­ing a company’s busi­ness res­cue pro­ceed­ings, the board, or one or more direc­tors of the com­pany, pur­ports to take any action on behalf of the com­pany that requires the approval of the prac­ti­tioner, that action is void unless approved by the 30 prac­ti­tioner.
(5) At any time dur­ing the busi­ness res­cue pro­ceed­ings, the prac­ti­tioner may apply to a court for an order remov­ing a direc­tor from office on the grounds that the direc­tor has—

(a) failed to com­ply with a require­ment of this Chap­ter; or 35

(b) by act or omis­sion, has impeded, or is impeding—

(i) the prac­ti­tioner in the per­for­mance of the pow­ers and func­tions of prac­ti­tioner;
(ii) the man­age­ment of the com­pany by the prac­ti­tioner; or
(iii) the devel­op­ment or imple­men­ta­tion of a busi­ness res­cue plan in 40 accor­dance with this Chap­ter.
(6) Sub­sec­tion (5) is in addi­tion to any right of a per­son to apply to a court for an order con­tem­plated in sec­tion 162.

Part B

Practitioner’s func­tions and terms of appoint­ment 45

Qual­i­fi­ca­tions of practitioners

138. (1) A per­son may be appointed as the prac­ti­tioner of a com­pany only if the person—

(a) is a mem­ber in good stand­ing of a pro­fes­sion sub­ject to reg­u­la­tion by a reg­u­la­tory author­ity pre­scribed by the Min­is­ter in terms of sub­sec­tion (2); 50

(b) is not sub­ject to an order of pro­ba­tion in terms of sec­tion 162(7);

© would not be dis­qual­i­fied from act­ing as a direc­tor of the com­pany in terms of sec­tion 69(8);

244

(d) does not have any other rela­tion­ship with the com­pany such as would lead a rea­son­able and informed third party to con­clude that the integrity, impar­tial­ity or objec­tiv­ity of that per­son is com­pro­mised by that rela­tion­ship; and

(e) is not related to a per­son who has a rela­tion­ship con­tem­plated in para­graph (d). 5

(2) The Min­is­ter may des­ig­nate one per­son or asso­ci­a­tion within the Repub­lic to reg­u­late the prac­tice of per­sons as prac­ti­tion­ers in terms of this Act, if that per­son or association—

(a) is com­mit­ted to achiev­ing the pur­poses of this Chapter;

(b) func­tions pre­dom­i­nantly to pro­mote sound prin­ci­ples and good prac­tice of 10 busi­ness turn­around or res­cue; and

© has suf­fi­cient human, finan­cial and oper­a­tional resources, and ade­quate admin­is­tra­tive pro­ce­dures and safe­guards, to enable it to func­tion effi­ciently and to effec­tively carry out its func­tions in terms of this Chap­ter, or presents

to the Min­is­ter a cred­i­ble plan to acquire or develop those resources. 15 (3) The Min­is­ter may—

(a) impose rea­son­able con­di­tions upon a per­son or asso­ci­a­tion des­ig­nated by the Min­is­ter in terms of sub­sec­tion (2) with respect to the car­ry­ing out of its func­tions and pow­ers in terms of this Chap­ter; and

(b) make reg­u­la­tions pre­scrib­ing— 20 (i) min­i­mum qual­i­fi­ca­tions for admis­sion of a per­son to the prac­tice of a

busi­ness res­cue prac­ti­tioner; and
(ii) pro­ce­dures to be fol­lowed by a per­son or asso­ci­a­tion des­ig­nated by the Min­is­ter in terms of sub­sec­tion (2) in car­ry­ing out its func­tions and pow­ers in terms of this Chap­ter. 25

Removal and replace­ment of practitioner

139. (1) A prac­ti­tioner may be removed only—

(a) by a court order in terms of sec­tion 130; or

(b) as pro­vided for in this section.

(2) Upon request of an affected per­son, or on its own motion, the court may remove 30 a prac­ti­tioner from office on any of the fol­low­ing grounds:

(a) Incom­pe­tence or fail­ure to per­form duties;

(b) fail­ure to exer­cise the proper degree of care in the per­for­mance of the practitioner’s functions;

© engag­ing in ille­gal acts or con­duct; 35

(d) if the prac­ti­tioner no longer sat­is­fies the require­ments set out in section

138(1);

(e) con­flict of inter­est or lack of inde­pen­dence; or

(f) the prac­ti­tioner is inca­pac­i­tated and unable to per­form the func­tions of that office, and is unlikely to regain that capac­ity within a rea­son­able time. 40

(3) The com­pany, or the cred­i­tor who nom­i­nated the prac­ti­tioner, as the case may be, must appoint a new prac­ti­tioner if a prac­ti­tioner dies, resigns or is removed from office, sub­ject to the right of an affected per­son to bring a fresh appli­ca­tion in terms of sec­tion
130(1)(b) to set aside that new appointment.

Gen­eral pow­ers and duties of prac­ti­tion­ers 45

140. (1) Dur­ing a company’s busi­ness res­cue pro­ceed­ings, the prac­ti­tioner, in addi­tion to any other pow­ers and duties set out in this Chapter—

(a) has full man­age­ment con­trol of the com­pany in sub­sti­tu­tion for its board and pre-​existing management;

(b) may del­e­gate any power or func­tion of the prac­ti­tioner to a per­son who was 50 part of the board or pre-​existing man­age­ment of the company;

© may—

(i) remove from office any per­son who forms part of the pre-​existing man­age­ment of the com­pany; or
(ii) appoint a per­son as part of the man­age­ment of a com­pany, whether to fill 55 a vacancy or not, sub­ject to sub­sec­tion (2); and
246

(d) is respon­si­ble to—

(i) develop a busi­ness res­cue plan to be con­sid­ered by affected per­sons, in accor­dance with Part D of this Chap­ter; and
(ii) imple­ment any busi­ness res­cue plan that has been adopted in accor­dance
with Part D of this Chap­ter. 5 (2) Except with the approval of the court on appli­ca­tion by the prac­ti­tioner, a
prac­ti­tioner may not appoint a per­son as part of the man­age­ment of the com­pany, or an advi­sor to the com­pany or to the prac­ti­tioner, if that person—

(a) has any other rela­tion­ship with the com­pany such as would lead a reasonable

and informed third party to con­clude that the integrity, impar­tial­ity or 10 objec­tiv­ity of that per­son is com­pro­mised by that rela­tion­ship; or

(b) is related to a per­son who has a rela­tion­ship con­tem­plated in para­graph (a). (3) Dur­ing a company’s busi­ness res­cue pro­ceed­ings, the practitioner—

(a) is an offi­cer of the court, and must report to the court in accor­dance with any applic­a­ble rules of, or orders made by, the court; 15

(b) has the respon­si­bil­i­ties, duties and lia­bil­i­ties of a direc­tor of the com­pany, as set out in sec­tions 75 to 77; and

© other than as con­tem­plated in para­graph (b)

(i) is not liable for any act or omis­sion in good faith in the course of the exer­cise of the pow­ers and per­for­mance of the func­tions of prac­ti­tioner; 20 but
(ii) may be held liable in accor­dance with any rel­e­vant law for the con­se­quences of any act or omis­sion amount­ing to gross neg­li­gence in the exer­cise of the pow­ers and per­for­mance of the func­tions of
prac­ti­tioner. 25 (4) If the busi­ness res­cue process con­cludes with an order plac­ing the com­pany in
liq­ui­da­tion, any per­son who has acted as prac­ti­tioner dur­ing the busi­ness res­cue process may not be appointed as liq­uida­tor of the company.

Inves­ti­ga­tion of affairs of company

141. (1) As soon as prac­ti­ca­ble after being appointed, a prac­ti­tioner must inves­ti­gate 30 the company’s affairs, busi­ness, prop­erty, and finan­cial sit­u­a­tion, and after hav­ing done

so, con­sider whether there is any rea­son­able prospect of the com­pany being res­cued. (2) If, at any time dur­ing busi­ness res­cue pro­ceed­ings, the prac­ti­tioner con­cludes
that—

(a) there is no rea­son­able prospect for the com­pany to be res­cued, the prac­ti­tioner 35 must—

(i) so inform the court, the com­pany, and all affected per­sons in the pre­scribed man­ner; and
(ii) apply to the court for an order dis­con­tin­u­ing the busi­ness res­cue pro­ceed­ings and plac­ing the com­pany into liq­ui­da­tion; 40

(b) there no longer are rea­son­able grounds to believe that the com­pany is finan­cially dis­tressed, the prac­ti­tioner must so inform the court, the com­pany, and all affected per­sons in the pre­scribed man­ner, and—

(i) if the busi­ness res­cue process was con­firmed by a court order in terms of sec­tion 130, or ini­ti­ated by an appli­ca­tion to the court in terms of sec­tion 45
131, apply to a court for an order ter­mi­nat­ing the busi­ness res­cue pro­ceed­ings; or
(ii) oth­er­wise, file a notice of ter­mi­na­tion of the busi­ness res­cue pro­ceed­ings;
or

© there is evi­dence, in the deal­ings of the com­pany before the busi­ness res­cue 50 pro­ceed­ings began, of—

(i) void­able trans­ac­tions, or a fail­ure by the com­pany or any direc­tor to per­form any mate­r­ial oblig­a­tion relat­ing to the com­pany, the prac­ti­tioner must direct the man­age­ment to take any nec­es­sary steps to rec­tify the
mat­ter; 55 (ii) reck­less trad­ing, fraud or other con­tra­ven­tion of any law relat­ing to the
com­pany, the prac­ti­tioner must—

(aa) for­ward the evi­dence to the appro­pri­ate author­ity for fur­ther inves­ti­ga­tion and pos­si­ble pros­e­cu­tion; and

248

(bb) direct the man­age­ment to take any nec­es­sary steps to rec­tify the mat­ter, includ­ing recov­er­ing any mis­ap­pro­pri­ated assets of the company.

(3) A court to which an appli­ca­tion has been made in terms of sub­sec­tion (2)(a)(ii)
may make the order applied for, or any other order that the court con­sid­ers appro­pri­ate 5 in the circumstances.

Direc­tors of com­pany to co-​operate with and assist practitioner

142. (1) As soon as prac­ti­ca­ble after busi­ness res­cue pro­ceed­ings begin, each direc­tor of a com­pany must deliver to the prac­ti­tioner all books and records that relate to the affairs of the com­pany and are in the director’s pos­ses­sion. 10

(2) Any direc­tor of a com­pany who knows where other books and records relat­ing to the com­pany are being kept, must inform the prac­ti­tioner as to the where­abouts of those books and records.
(3) Within five busi­ness days after busi­ness res­cue pro­ceed­ings begin, or such longer period as the prac­ti­tioner allows, the direc­tors of a com­pany must pro­vide the 15 prac­ti­tioner with a state­ment of affairs con­tain­ing, at a min­i­mum, par­tic­u­lars of the following:

(a) Any mate­r­ial trans­ac­tions involved the com­pany or the assets of the com­pany, and occur­ring within 12 months imme­di­ately before the busi­ness res­cue pro­ceed­ings began; 20

(b) any court, arbi­tra­tion or admin­is­tra­tive pro­ceed­ings, includ­ing enforce­ment pro­ceed­ings, involv­ing the company;

© the assets and lia­bil­i­ties of the com­pany, and its income and dis­burse­ments within the imme­di­ately pre­ced­ing 12 months;

(d) the num­ber of employ­ees, and any col­lec­tive agree­ments or other agree­ments 25 relat­ing to the rights of employees;

(e) any debtors and their oblig­a­tions to the com­pany; and

(f) any cred­i­tors and their rights or claims against the company.

(4) No per­son is enti­tled, as against the prac­ti­tioner of a com­pany, to retain pos­ses­sion
of any books or records of the com­pany, or to claim or enforce a lien over any such 30 books or records.

Remu­ner­a­tion of practitioner

143. (1) The prac­ti­tioner is enti­tled to charge an amount to the com­pany for the remu­ner­a­tion and expenses of the prac­ti­tioner in accor­dance with the tar­iff pre­scribed in terms of sub­sec­tion (6). 35

(2) The prac­ti­tioner may pro­pose an agree­ment with the com­pany pro­vid­ing for fur­ther remu­ner­a­tion, addi­tional to that con­tem­plated in sub­sec­tion (1), to be cal­cu­lated on the basis of a con­tin­gency related to—

(a) the adop­tion of a busi­ness res­cue plan at all, or within a par­tic­u­lar time, or the inclu­sion of any par­tic­u­lar mat­ter within such a plan; or 40

(b) the attain­ment of any par­tic­u­lar result or com­bi­na­tion of results relat­ing to the busi­ness res­cue proceedings.

(3) Sub­ject to sub­sec­tion (4), an agree­ment con­tem­plated in sub­sec­tion (2) is final and bind­ing on the com­pany if it is approved by—

(a) the hold­ers of a major­ity of the cred­i­tors’ vot­ing inter­ests, as deter­mined in 45 accor­dance with sec­tion 145(4) to (6), present and vot­ing at a meet­ing called

for the pur­pose of con­sid­er­ing the pro­posed agree­ment; and

(b) the hold­ers of a major­ity of the vot­ing rights attached to any shares of the com­pany that enti­tle the share­holder to a por­tion of the resid­ual value of the com­pany on winding-​up, present and vot­ing at a meet­ing called for the 50 pur­pose of con­sid­er­ing the pro­posed agreement.

(4) A cred­i­tor or share­holder who voted against a pro­posal con­tem­plated in this sec­tion may apply to a court within 10 busi­ness days after the date of vot­ing on that pro­posal, for an order set­ting aside the agree­ment on the grounds that—

(a) the agree­ment is not just and equi­table; or 55

250

(b) that the remu­ner­a­tion pro­vided for in the agree­ment is egre­giously unrea­son– able hav­ing regard to the finan­cial cir­cum­stances of the company.

(5) To the extent that the practitioner’s remu­ner­a­tion and expenses are not fully paid, the practitioner’s claim for those amounts will rank in pri­or­ity before the claims of all other secured and unse­cured cred­i­tors. 5
(6) The Min­is­ter may make reg­u­la­tions pre­scrib­ing a tar­iff of fees and expenses for the pur­pose of sub­sec­tion (1).

Part C

Rights of affected per­sons dur­ing busi­ness res­cue proceedings

Rights of employ­ees 10

144. (1) Dur­ing a company’s busi­ness res­cue pro­ceed­ings any employ­ees of the com­pany who are—

(a) rep­re­sented by a reg­is­tered trade union may exer­cise any rights set out in this

Chap­ter—
(i) col­lec­tively through their trade union; and 15 (ii) in accor­dance with applic­a­ble labour law; or

(b) not rep­re­sented by a reg­is­tered trade union may elect to exer­cise any rights set out in this Chap­ter either directly, or by proxy through an employee organ­i­sa­tion or representative.

(2) To the extent that any remu­ner­a­tion, reim­burse­ment for expenses or other amount 20 of money relat­ing to employ­ment became due and payable by a com­pany to an employee at any time before the begin­ning of the company’s busi­ness res­cue pro­ceed­ings, and had not been paid to that employee imme­di­ately before the begin­ning
of those pro­ceed­ings, the employee is a pre­ferred unse­cured cred­i­tor of the com­pany for
the pur­poses of this Chap­ter. 25 (3) Dur­ing a company’s busi­ness res­cue process, every reg­is­tered trade union
rep­re­sent­ing any employ­ees of the com­pany, and any employee who is not so rep­re­sented, is enti­tled to—

(a) notice of each court pro­ceed­ing, deci­sion, meet­ing or other rel­e­vant event con­cern­ing the busi­ness res­cue pro­ceed­ings and such notice must be given to 30 employ­ees at their work­place and served at the head office of the rel­e­vant trade union;

(b) par­tic­i­pate in any court pro­ceed­ings aris­ing dur­ing the busi­ness res­cue proceedings;

© form a com­mit­tee of employ­ees’ rep­re­sen­ta­tives; 35

(d) be con­sulted by the prac­ti­tioner dur­ing the devel­op­ment of the busi­ness res­cue plan, and afforded suf­fi­cient oppor­tu­nity to review any such plan and pre­pare a sub­mis­sion con­tem­plated in sec­tion 152(1)©;

(e) be present and make a sub­mis­sion to the meet­ing of the hold­ers of vot­ing inter­ests before a vote is taken on any pro­posed busi­ness res­cue plan, as 40 con­tem­plated in sec­tion 152(1)©;

(f) vote with cred­i­tors on a motion to approve a pro­posed busi­ness plan, to the extent that the employee is a cred­i­tor, as con­tem­plated in sub­sec­tion (1); and

(g) if the pro­posed busi­ness res­cue plan is rejected, to—

(i) pro­pose the devel­op­ment of an alter­na­tive plan, in the man­ner 45 con­tem­plated in sec­tion 153; or
(ii) present an offer to acquire the inter­ests of one or more affected per­sons, in the man­ner con­tem­plated in sec­tion 153.
(4) A med­ical scheme, or a pen­sion scheme includ­ing a prov­i­dent scheme, for the ben­e­fit of the past or present employ­ees of a com­pany is an unse­cured cred­i­tor of the 50 com­pany for the pur­poses of this Chap­ter to the extent of—

(a) any amount that was due and payable by the com­pany to the trustees of the scheme at any time before the begin­ning of the company’s busi­ness res­cue pro­ceed­ings, and that had not been paid imme­di­ately before the begin­ning of those pro­ceed­ings; and 55

252

(b) in the case of a defined ben­e­fit pen­sion scheme, the present value at the com­mence­ment of the busi­ness res­cue pro­ceed­ings of any unfunded lia­bil­ity under that scheme.

(5) The rights set out in this sec­tion are in addi­tion to any other rights aris­ing or accru­ing in terms of any law, con­tract, col­lec­tive agree­ment, share­hold­ing, secu­rity or 5 court order.

Par­tic­i­pa­tion by creditors

145. (1) Each cred­i­tor is enti­tled to—

(a) notice of each court pro­ceed­ing, deci­sion, meet­ing or other rel­e­vant event con­cern­ing the busi­ness res­cue pro­ceed­ings; 10

(b) par­tic­i­pate in any court pro­ceed­ings aris­ing dur­ing the busi­ness res­cue proceedings;

© for­mally par­tic­i­pate in a company’s busi­ness res­cue pro­ceed­ings to the extent pro­vided for in this Chap­ter; and

(d) infor­mally par­tic­i­pate in those pro­ceed­ings by mak­ing pro­pos­als for a 15 busi­ness res­cue plan to the practitioner.

(2) In addi­tion to the rights set out in sub­sec­tion (1), each cred­i­tor has—

(a) the right to vote to amend, approve or reject a pro­posed busi­ness res­cue plan, in the man­ner con­tem­plated in sec­tion 152; and

(b) if the pro­posed busi­ness res­cue plan is rejected, a fur­ther right to— 20 (i) pro­pose the devel­op­ment of an alter­na­tive plan, in the manner

con­tem­plated in sec­tion 153; or
(ii) present an offer to acquire the inter­ests of any or all of the other cred­i­tors in the man­ner con­tem­plated in sec­tion 153.
(3) The cred­i­tors of a com­pany are enti­tled to form a cred­i­tors’ com­mit­tee, and 25 through that com­mit­tee are enti­tled to be con­sulted by the prac­ti­tioner dur­ing the devel­op­ment of the busi­ness res­cue plan.
(4) In respect of any deci­sion con­tem­plated in this Chap­ter that requires the sup­port of the hold­ers of cred­i­tors’ vot­ing interests—

(a) a secured or unse­cured cred­i­tor has a vot­ing inter­est equal to the value of the 30 amount owed to that cred­i­tor by the com­pany; and

(b) a con­cur­rent cred­i­tor who would be sub­or­di­nated in a liq­ui­da­tion has a vot­ing inter­est, as inde­pen­dently and expertly appraised and val­ued at the request of the prac­ti­tioner, equal to the amount, if any, that the cred­i­tor could reasonably

expect to receive in such a liq­ui­da­tion of the com­pany. 35 (5) The prac­ti­tioner of a com­pany must—

(a) deter­mine whether a cred­i­tor is inde­pen­dent for the pur­poses of this Chapter;

(b) request a suit­ably qual­i­fied per­son to inde­pen­dently and expertly appraise and value an inter­est con­tem­plated in sub­sec­tion (4)(b); and

© give a writ­ten notice of the deter­mi­na­tion, or appraisal and val­u­a­tion, to the 40 per­son con­cerned at least 15 busi­ness days before the date of the meet­ing to be con­vened in terms of sec­tion 151.

(6) Within five busi­ness days after receiv­ing a notice of a deter­mi­na­tion con­tem­plated in sub­sec­tion (5), a per­son may apply to a court to—

(a) review the practitioner’s deter­mi­na­tion that the per­son is, or is not, an 45 inde­pen­dent cred­i­tor; or

(b) review, re-​appraise and re-​value that person’s vot­ing inter­est, as deter­mined in terms of sub­sec­tion (5)(b).

Par­tic­i­pa­tion by hold­ers of company’s securities

146. Dur­ing a company’s busi­ness res­cue pro­ceed­ings, each holder of any issued 50 secu­rity of the com­pany is enti­tled to—

(a) notice of each court pro­ceed­ing, deci­sion, meet­ing or other rel­e­vant event con­cern­ing the busi­ness res­cue proceedings;

(b) par­tic­i­pate in any court pro­ceed­ings aris­ing dur­ing the busi­ness res­cue pro­ceed­ings; 55

254

© for­mally par­tic­i­pate in a company’s busi­ness res­cue pro­ceed­ings to the extent pro­vided for in this Chapter;

(d) vote to approve or reject a pro­posed busi­ness res­cue plan in the man­ner con­tem­plated in sec­tion 152, if the plan would alter the rights asso­ci­ated with

the class of secu­ri­ties held by that per­son; and 5

(e) if the busi­ness res­cue plan is rejected, to—

(i) pro­pose the devel­op­ment of an alter­na­tive plan, in the man­ner con­tem­plated in sec­tion 153; or
(ii) present an offer to acquire the inter­ests of any or all of the cred­i­tors or other hold­ers of the company’s secu­ri­ties in the man­ner con­tem­plated in 10 sec­tion 153.

First meet­ing of creditors

147. (1) Within 10 busi­ness days after being appointed, the prac­ti­tioner must con­vene, and pre­side over, a first meet­ing of cred­i­tors, at which—

(a) the prac­ti­tioner— 15 (i) must inform the cred­i­tors whether the prac­ti­tioner believes that there is a

rea­son­able prospect of res­cu­ing the com­pany; and
(ii) may receive proof of claims by cred­i­tors; and

(b) the cred­i­tors may deter­mine whether or not a com­mit­tee of cred­i­tors should be appointed and, if so, may appoint the mem­bers of the com­mit­tee. 20

(2) The prac­ti­tioner must give notice of the first meet­ing of cred­i­tors to every cred­i­tor of the com­pany whose name and address is known to, or can rea­son­ably be obtained by, the prac­ti­tioner, set­ting out the—

(a) date, time and place of the meet­ing; and

(b) agenda for the meet­ing. 25 (3) At any meet­ing of cred­i­tors, other than the meet­ing con­tem­plated in sec­tion 151,

a deci­sion sup­ported by the hold­ers of a sim­ple major­ity of the inde­pen­dent cred­i­tors’
vot­ing inter­ests voted on a mat­ter, is the deci­sion of the meet­ing on that matter.

First meet­ing of employ­ees’ representatives

148. (1) Within 10 busi­ness days after being appointed, the prac­ti­tioner must con­vene, 30 and pre­side over, a first meet­ing of employ­ees’ rep­re­sen­ta­tives, at which—

(a) the prac­ti­tioner must inform the employ­ees’ rep­re­sen­ta­tives whether the prac­ti­tioner believes that there is a rea­son­able prospect of res­cu­ing the com­pany; and

(b) the employ­ees’ rep­re­sen­ta­tives may deter­mine whether or not an employ­ees’ 35 com­mit­tee should be appointed and, if so, may appoint the mem­bers of the committee.

(2) The prac­ti­tioner must give notice of the meet­ing to every reg­is­tered trade union rep­re­sent­ing employ­ees of the com­pany and, if there are any employ­ees who are not rep­re­sented by such a reg­is­tered trade union, to those employ­ees, or their rep­re­senta– 40 tives, set­ting out the—

(a) date, time and place of the meet­ing; and

(b) agenda for the meeting.

Func­tions, duties and mem­ber­ship of com­mit­tees of affected persons

149. (1) A com­mit­tee of employ­ees, or of cred­i­tors, appointed in terms of sec­tion 147 45 or 148, respectively—

(a) may con­sult with the prac­ti­tioner about any mat­ter relat­ing to the busi­ness res­cue pro­ceed­ings, but may not direct or instruct the practitioner;

(b) may, on behalf of the gen­eral body of cred­i­tors or employ­ees, respec­tively, receive and con­sider reports relat­ing to the busi­ness res­cue pro­ceed­ings; and 50

© must act inde­pen­dently of the prac­ti­tioner to ensure fair and unbi­ased rep­re­sen­ta­tion of cred­i­tors’ or employ­ees’ interests.

256
(2) A per­son may be a mem­ber of a com­mit­tee of cred­i­tors or employ­ees, respec­tively, only if the per­son is—

(a) an inde­pen­dent cred­i­tor, or an employee, of the company;

(b) an agent, proxy or attor­ney of an inde­pen­dent cred­i­tor or employee, or other per­son act­ing under a gen­eral power of attor­ney; or 5

© autho­rised in writ­ing by an inde­pen­dent cred­i­tor or employee to be a member.

Part D

Devel­op­ment and approval of busi­ness res­cue plan

Pro­posal of busi­ness res­cue plan

150. (1) The prac­ti­tioner, after con­sult­ing the cred­i­tors, other affected per­sons, and the 10 man­age­ment of the com­pany, must pre­pare a busi­ness res­cue plan for con­sid­er­a­tion and pos­si­ble adop­tion at a meet­ing held in terms of sec­tion 151.

(2) The busi­ness res­cue plan must con­tain all the infor­ma­tion rea­son­ably required to facil­i­tate affected per­sons in decid­ing whether or not to accept or reject the plan, and
must be divided into three Parts, as fol­lows: 15

(a) Part A — Back­ground, which must include at least—

(i) a com­plete list of all the mate­r­ial assets of the com­pany, as well as an indi­ca­tion as to which assets were held as secu­rity by cred­i­tors when the busi­ness res­cue pro­ceed­ings began;
(ii) a com­plete list of the cred­i­tors of the com­pany when the busi­ness res­cue 20 pro­ceed­ings began, as well as an indi­ca­tion as to which cred­i­tors would qual­ify as secured, statu­tory pref­er­ent and con­cur­rent in terms of the laws
of insol­vency, and an indi­ca­tion of which of the cred­i­tors have proved their claims;
(iii) the prob­a­ble div­i­dend that would be received by cred­i­tors, in their 25 spe­cific classes, if the com­pany were to be placed in liq­ui­da­tion;
(iv) a com­plete list of the hold­ers of the company’s issued secu­ri­ties;
(v) a copy of the writ­ten agree­ment con­cern­ing the practitioner’s remu­nera– tion; and
(vi) a state­ment whether the busi­ness res­cue plan includes a pro­posal made 30 infor­mally by a cred­i­tor of the company.

(b) Part B — Pro­pos­als, which must include at least—

(i) the nature and dura­tion of any mora­to­rium for which the busi­ness res­cue plan makes pro­vi­sion;
(ii) the extent to which the com­pany is to be released from the pay­ment of its 35 debts, and the extent to which any debt is pro­posed to be con­verted to equity in the com­pany, or another com­pany;
(iii) the ongo­ing role of the com­pany, and the treat­ment of any exist­ing agree­ments;
(iv) the prop­erty of the com­pany that is to be avail­able to pay cred­i­tors’ 40 claims in terms of the busi­ness res­cue plan;
(v) the order of pref­er­ence in which the pro­ceeds of prop­erty will be applied to pay cred­i­tors if the busi­ness res­cue plan is adopted;
(vi) the ben­e­fits of adopt­ing the busi­ness res­cue plan as opposed to the ben­e­fits that would be received by cred­i­tors if the com­pany were to be 45 placed in liq­ui­da­tion; and
(vii) the effect that the busi­ness res­cue plan will have on the hold­ers of each class of the company’s issued securities.

© Part C — Assump­tions and con­di­tions, which must include at least—

(i) a state­ment of the con­di­tions that must be sat­is­fied, if any, for the 50 busi­ness res­cue plan to—

(aa) come into oper­a­tion; and

(bb) be fully implemented;

(ii) the effect, if any, that the busi­ness res­cue plan con­tem­plates on the num­ber of employ­ees, and their terms and con­di­tions of employ­ment; 55
258
(iii) the cir­cum­stances in which the busi­ness res­cue plan will end; and
(iv) a projected—

(aa) bal­ance sheet for the com­pany; and

(bb) state­ment of income and expenses for the ensu­ing three years,

pre­pared on the assump­tion that the pro­posed busi­ness plan is adopted. 5 (3) The pro­jected bal­ance sheet and state­ment required by sub­sec­tion (2)©(iv)—

(a) must include a notice of any mate­r­ial assump­tions on which the pro­jec­tions are based; and

(b) may include alter­na­tive pro­jec­tions based on vary­ing assump­tions and con­tin­gen­cies. 10

(4) A pro­posed busi­ness res­cue plan must con­clude with a cer­tifi­cate by the prac­ti­tioner stat­ing that any—

(a) actual infor­ma­tion pro­vided appears to be accu­rate, com­plete, and up to date;

and

(b) pro­jec­tions pro­vided are esti­mates made in good faith on the basis of fac­tual 15 infor­ma­tion and assump­tions as set out in the statement.

(5) The busi­ness res­cue plan must be pub­lished by the com­pany within 25 busi­ness days after the date on which the prac­ti­tioner was appointed, or such longer time as may be allowed by—

(a) the court, on appli­ca­tion by the com­pany; or 20

(b) the hold­ers of a major­ity of the cred­i­tors’ vot­ing interests.

Meet­ing to deter­mine future of company

151. (1) The prac­ti­tioner must con­vene and pre­side over a meet­ing of cred­i­tors and any other hold­ers of a vot­ing inter­est, called for the pur­pose of con­sid­er­ing the pro­posed res­cue plan within 10 busi­ness days after the pub­li­ca­tion of that plan in terms of sec­tion 25

150.
(2) At least five busi­ness days before the meet­ing con­tem­plated in sub­sec­tion (1), the prac­ti­tioner must deliver a notice of the meet­ing to all affected per­sons, set­ting out—

(a) the date, time and place of the meeting;

(b) the agenda of the meet­ing; and 30

© a sum­mary of the rights of affected per­sons to par­tic­i­pate in and vote at the meeting.

(3) The meet­ing con­tem­plated in this sec­tion may be adjourned from time to time, as nec­es­sary or expe­di­ent, until a deci­sion regard­ing the company’s future has been taken
in accor­dance with sec­tions 152 and 153. 35

Con­sid­er­a­tion of busi­ness res­cue plan

152. (1) At a meet­ing con­vened in terms of sec­tion 151, the prac­ti­tioner must—

(a) intro­duce the pro­posed busi­ness res­cue plan for con­sid­er­a­tion by the cred­i­tors, and if applic­a­ble, by the shareholders;

(b) inform the meet­ing whether the prac­ti­tioner con­tin­ues to believe that there is 40 a rea­son­able prospect of the com­pany being rescued;

© pro­vide an oppor­tu­nity for the employ­ees’ rep­re­sen­ta­tives to address the meeting;

(d) invite dis­cus­sion, and enter­tain and con­duct a vote, on any motions to—

(i) amend the pro­posed plan, in any man­ner moved and sec­onded by hold­ers 45 of cred­i­tors’ vot­ing inter­ests, and sat­is­fac­tory to the prac­ti­tioner; or
(ii) direct the prac­ti­tioner to adjourn the meet­ing in order to revise the plan for fur­ther con­sid­er­a­tion; and

(e) call for a vote for pre­lim­i­nary approval of the pro­posed plan, as amended if applic­a­ble, unless the meet­ing has first been adjourned in accor­dance with 50 para­graph (d)(ii).

(2) In a vote called in terms of sub­sec­tion (1)(e), the pro­posed busi­ness res­cue plan will be approved on a pre­lim­i­nary basis if—

(a) it was sup­ported by the hold­ers of more than 75% of the cred­i­tors’ vot­ing inter­ests that were voted; and 55

260

(b) the votes in sup­port of the pro­posed plan included at least 50% of the inde­pen­dent cred­i­tors’ vot­ing inter­ests, if any, that were voted.

(3) If a pro­posed busi­ness res­cue plan—

(a) is not approved on a pre­lim­i­nary basis, as con­tem­plated in sub­sec­tion (2), the

plan is rejected, and may be con­sid­ered fur­ther only in terms of sec­tion 153; 5

(b) does not alter the rights of the hold­ers of any class of the company’s secu­ri­ties, approval of that plan on a pre­lim­i­nary basis in terms of sub­sec­tion (2) con­sti­tutes also the final adop­tion of that plan, sub­ject to sat­is­fac­tion of any con­di­tions on which that plan is con­tin­gent; or

© does alter the rights of any class of hold­ers of the company’s secu­ri­ties— 10 (i) the prac­ti­tioner must imme­di­ately hold a meet­ing of hold­ers of the class,

or classes of secu­ri­ties who rights would be altered by the plan, and call for a vote by them to approve the adop­tion of the pro­posed busi­ness res­cue plan; and
(ii) if, in a vote con­tem­plated in sub­para­graph (i), a major­ity of the vot­ing 15 rights that were exercised—

(aa) sup­port adop­tion of the plan, it will have been finally adopted, sub­ject only to sat­is­fac­tion of any con­di­tions on which it is con­tin­gent; or

(bb) oppose adop­tion of the plan, the plan is rejected, and may be 20 con­sid­ered fur­ther only in terms of sec­tion 153.

(4) A busi­ness res­cue plan that has been adopted is bind­ing on the com­pany, and on each of the cred­i­tors of the com­pany and every holder of the company’s secu­ri­ties, whether or not such a person—

(a) was present at the meet­ing; 25

(b) voted in favour of adop­tion of the plan; or

© in the case of cred­i­tors, had proven their claims against the company.

(5) The com­pany, under the direc­tion of the prac­ti­tioner, must take all nec­es­sary steps to—

(a) attempt to sat­isfy any con­di­tions on which the busi­ness res­cue plan is 30 con­tin­gent; and

(b) imple­ment the plan as adopted.

(6) To the extent nec­es­sary to imple­ment an adopted busi­ness res­cue plan—

(a) the prac­ti­tioner may, in accor­dance with that plan, deter­mine the consideration

for, and issue, any autho­rised secu­ri­ties of the com­pany, despite sec­tion 38 or 35
40 to the con­trary; and

(b) if the busi­ness res­cue plan was approved by the share­hold­ers of the com­pany, as con­tem­plated in sub­sec­tion (3)©, the prac­ti­tioner may amend the company’s Mem­o­ran­dum of Incor­po­ra­tion to autho­rise, and deter­mine the pref­er­ences, rights, lim­i­ta­tions and other terms of, any secu­ri­ties that are not 40 oth­er­wise autho­rised, but are con­tem­plated to be issued in terms the busi­ness res­cue plan, despite any pro­vi­sion of sec­tion 16, 36 or 37 to the contrary.

(7) Except to the extent that an approved busi­ness res­cue plan pro­vides oth­er­wise, a pre-​emptive right of any share­holder of the com­pany, as con­tem­plated in sec­tion 39,
does not apply with respect to an issue of shares by the com­pany in terms of the busi­ness 45 res­cue plan.
(8) When the busi­ness res­cue plan has been sub­stan­tially imple­mented, the prac­ti­tioner must file a notice of the sub­stan­tial imple­men­ta­tion of the busi­ness res­cue plan.

Fail­ure to adopt busi­ness res­cue plan 50

153. (1) (a) If a busi­ness res­cue plan has been rejected as con­tem­plated in sec­tion
152(3)(a) or ©(ii)(bb) the prac­ti­tioner may—
(i) seek a vote of approval from the hold­ers of vot­ing inter­ests to pre­pare and pub­lish a revised plan; or
262
(ii) advise the meet­ing that the com­pany will apply to a court to set aside the result of the vote by the hold­ers of vot­ing inter­ests or share­hold­ers, as the case may be, on the grounds that it was inappropriate.

(b) If the prac­ti­tioner does not take any action con­tem­plated in para­graph (a)

(i) any affected per­son present at the meet­ing may— 5

(aa) call for a vote of approval from the hold­ers of vot­ing inter­ests requir­ing the prac­ti­tioner to pre­pare and pub­lish a revised plan; or

(bb) apply to the court to set aside the result of the vote by the hold­ers of vot­ing inter­ests or share­hold­ers, as the case may be, on the grounds that

it was inap­pro­pri­ate; or 10 (ii) any affected per­son, or com­bi­na­tion of affected per­sons, may make a bind­ing
offer to pur­chase the vot­ing inter­ests of one or more per­sons who opposed adop­tion of the busi­ness res­cue plan, at a value inde­pen­dently and expertly deter­mined, on the request of the prac­ti­tioner, to be a fair and rea­son­able esti­mate of the return to that per­son, or those per­sons, if the com­pany were to 15 be liq­ui­dated.
(2) If the prac­ti­tioner, act­ing in terms of sub­sec­tion (1)(a)(ii), or an affected per­son, act­ing in terms of sub­sec­tion (1)(b)(i)(bb), informs the meet­ing that an appli­ca­tion will be made to the court as con­tem­plated in those pro­vi­sions, the prac­ti­tioner must adjourn
the meet­ing— 20

(a) for five busi­ness days, unless the con­tem­plated appli­ca­tion is made to the court dur­ing that time; or

(b) until the court has dis­posed of the con­tem­plated application.

(3) If, on the request of the prac­ti­tioner in terms of sub­sec­tion (1)(a)(i), or a call by an affected per­son in terms of sub­sec­tion (1)(b)(i)(aa), the meet­ing directs the prac­ti­tioner 25 to pre­pare and pub­lish a revised busi­ness res­cue plan—

(a) the prac­ti­tioner must—

(i) con­clude the meet­ing after that vote; and
(ii) pre­pare and pub­lish a new or revised busi­ness res­cue plan within 10 busi­ness days; and 30

(b) the pro­vi­sions of this Part apply afresh to the pub­lish­ing and con­sid­er­a­tion of that new or revised plan.

(4) If an affected per­son makes an offer con­tem­plated in sub­sec­tion (1)(b)(ii), the prac­ti­tioner must—

(a) adjourn the meet­ing for no more than five busi­ness days, as nec­es­sary to afford 35 the prac­ti­tioner an oppor­tu­nity to make any nec­es­sary revi­sions to the busi­ness res­cue plan to appro­pri­ately reflect the results of the offer; and

(b) set a date for resump­tion of the meet­ing, with­out fur­ther notice, at which the pro­vi­sions of sec­tion 152 and this sec­tion will apply afresh.

(5) If no per­son takes any action con­tem­plated in sub­sec­tion (1), the prac­ti­tioner must 40 promptly file a notice of the ter­mi­na­tion of the busi­ness res­cue pro­ceed­ings.
(6) A holder of a vot­ing inter­est, or a per­son acquir­ing that inter­est in terms of a bind­ing offer, may apply to a court to review, re-​appraise and re-​value a deter­mi­na­tion by an inde­pen­dent expert in terms of sub­sec­tion (1)(b)(ii).

Dis­charge of debts and claims 45

154. (1) A busi­ness res­cue plan may pro­vide that, if it is imple­mented in accor­dance with its terms and con­di­tions, a cred­i­tor who has acceded to the dis­charge of the whole or part of a debt owing to that cred­i­tor will lose the right to enforce the rel­e­vant debt or part of it.

(2) If a busi­ness res­cue plan has been approved and imple­mented in accor­dance with 50 this Chap­ter, a cred­i­tor is not enti­tled to enforce any debt owed by the com­pany imme­di­ately before the begin­ning of the busi­ness res­cue process, except to the extent pro­vided for in the busi­ness res­cue plan.
264

Part E Com­pro­mise with creditors

Com­pro­mise between com­pany and creditors

155. (1) This sec­tion applies to a com­pany, irre­spec­tive of whether or not it is finan­cially dis­tressed as defined in sec­tion 128(1)(f), unless it is engaged in busi­ness 5 res­cue pro­ceed­ings in terms of this Chap­ter.
(2) The board of a com­pany, or the liq­uida­tor of such a com­pany if it is being wound up, may pro­pose an arrange­ment or a com­pro­mise of its finan­cial oblig­a­tions to all of its cred­i­tors, or to all of the mem­bers of any class of its cred­i­tors, by deliv­er­ing a copy of
the pro­posal, and notice of meet­ing to con­sider the pro­posal, to— 10

(a) every cred­i­tor of the com­pany, or every mem­ber of the rel­e­vant class of cred­i­tors whose name or address is known to, or can rea­son­ably be obtained by, the com­pany; and

(b) the Com­mis­sion.

(3) A pro­posal con­tem­plated in sub­sec­tion (2) must con­tain all infor­ma­tion rea­son­ably 15 required to facil­i­tate cred­i­tors in decid­ing whether or not to accept or reject the pro­posal,
and must be divided into three Parts, as follows:

(a) Part A — Back­ground, which must include at least—

(i) a com­plete list of all the mate­r­ial assets of the com­pany, as well as an indi­ca­tion as to which assets are held as secu­rity by cred­i­tors as of the 20 date of the pro­posal;
(ii) a com­plete list of the cred­i­tors of the com­pany as of the date of the pro­posal, as well as an indi­ca­tion as to which cred­i­tors would qual­ify as secured, statu­tory pref­er­ent and con­cur­rent in terms of the laws of insol­vency, and an indi­ca­tion of which of the cred­i­tors have proved their 25 claims;
(iii) the prob­a­ble div­i­dend that would be received by cred­i­tors, in their spe­cific classes, if the com­pany were to be placed in liq­ui­da­tion;
(iv) a com­plete list of the hold­ers of the com­pany issued secu­ri­ties, and the effect that the pro­posal would have on them, if any; and 30
(v) whether the pro­posal includes a pro­posal made infor­mally by a cred­i­tor of the company.

(b) Part B — Pro­pos­als, which must include at least—

(i) the nature and dura­tion of any pro­posed debt mora­to­rium;
(ii) the extent to which the com­pany is to be released from the pay­ment of its 35 debts, and the extent to which any debt is pro­posed to be con­verted to equity in the com­pany, or another com­pany;
(iii) the treat­ment of con­tracts and ongo­ing role of the com­pany;
(iv) the prop­erty of the com­pany that is pro­posed to be avail­able to pay cred­i­tors’ claims; 40
(v) the order of pref­er­ence in which the pro­ceeds of prop­erty of the com­pany will be applied to pay cred­i­tors if the pro­posal is adopted; and
(vi) the ben­e­fits of adopt­ing the pro­posal as opposed to the ben­e­fits that would be received by cred­i­tors if the com­pany were to be placed in liq­ui­da­tion. 45

© Part C — Assump­tions and con­di­tions, which must include at least—

(i) a state­ment of the con­di­tions that must be sat­is­fied, if any, for the pro­posal to—

(aa) come into oper­a­tion; and

(bb) be fully imple­mented; 50 (ii) the effect, if any, that the plan con­tem­plates on the num­ber of employees,

and their terms and con­di­tions of employ­ment; and
(iii) a projected—

(aa) bal­ance sheet for the com­pany; and

(bb) state­ment of income and expenses for the ensu­ing three years, 55 pre­pared on the assump­tion that the pro­posal is accepted.

Back to Business Rescue

Go to top