Effects of Business Rescue


Legal action against the com­pany dur­ing busi­ness rescue.

No legal pro­ceed­ings includ­ing an enforce­ment action, against the com­pany or its assets may com­mence or pro­ceed unless;

  • The prac­ti­tioner has con­sented to this in writing;
  • The court has given leave to this;
  • The claim is in terms of a set off made by the com­pany in legal pro­ceed­ings whether it is before or after the busi­ness res­cue date;
  • The action is a crim­i­nal pro­ceed­ing against the com­pany, its direc­tors or officers;
  • The claim is against any prop­erty or right over which the com­pany acts as a trustee;
  • The pro­ceed­ings are by a reg­u­la­tory author­ity in the exe­cu­tion of its duties and it has noti­fied the prac­ti­tioner in writing;

The effect of busi­ness res­cue on shareholders.

Dur­ing busi­ness res­cue pro­ceed­ings any change in in the clas­si­fi­ca­tion or sta­tus of issued secu­ri­ties of a com­pany other than by way of ordi­nary course of busi­ness is invalid except if the court or the busi­ness res­cue plan directs otherwise.

Secu­ri­ties are shares, deben­tures, or other instru­ments irre­spec­tive of their form of title, issued or autho­rised to be issued by a profit company.

The effect of busi­ness res­cue on employees.

Dur­ing busi­ness res­cue pro­ceed­ings employ­ees will con­tin­ued to be employed under the same terms and con­di­tions that applied prior to busi­ness res­cue, except when;

  • Changes occur in the ordi­nary course of attrition;
  • Employ­ees agree to dif­fer­ent terms and con­di­tions in accor­dance with labour laws;
  • Any retrench­ments con­tem­plated are done in com­pli­ance with labour laws;

A busi­ness res­cue prac­ti­tioner may not sus­pend an employ­ment con­tract for the dura­tion of the busi­ness res­cue proceedings.

Schemes for the ben­e­fit of employ­ees, past and present, is an unse­cured cred­i­tor to the extent that the amounts due are imme­di­ately before the begin­ning of busi­ness res­cue pro­ceed­ings, and in the case of a defined ben­e­fit fund, the present value of an unfunded lia­bil­ity at the com­mence­ment of busi­ness res­cue proceedings.

The effect of busi­ness res­cue on directors.

The direc­tors of the com­pany remain direc­tors of the com­pany but their pow­ers and duties are con­stricted in that the busi­ness res­cue prac­ti­tioner has full man­age­ment con­trol of the com­pany in sub­sti­tu­tion for its board and pre-​existing man­age­ment. Dur­ing this period all direc­tors are still bound by director’s fidu­ciary duties and duties regard­ing per­sonal finan­cial inter­ests and can incur per­sonal lia­bil­i­ties as deter­mined by the Act.

The effect of busi­ness res­cue on contracts.

Exist­ing con­tracts remain in force under busi­ness res­cue pro­ceed­ings, but the busi­ness res­cue prac­ti­tioner may entirely, par­tially or con­di­tion­ally sus­pend an agree­ment for the dura­tion of the busi­ness res­cue pro­ceed­ings. The prac­ti­tioner may also apply to court to entirely, par­tially or con­di­tion­ally can­cel any terms that are just and rea­son­able in the cir­cum­stances. Any party to an agree­ment that has been sus­pended or can­celled has a claim against the com­pany for dam­ages only.

What is the effect of busi­ness res­cue if I am using assets of the company?

If any prop­erty of the com­pany under busi­ness res­cue is in the pos­ses­sion of a third party as a result of a con­tract entered into before busi­ness res­cue they may retain it.

What is the effect of busi­ness res­cue if the com­pany under res­cue is using my assets in terms of a contract?

Any per­son that wants to exer­cise any right over prop­erty or an asset in the pos­ses­sion of the com­pany can only do so with the writ­ten con­sent of the busi­ness res­cue prac­ti­tioner and the prac­ti­tioner must not unrea­son­ably with­hold the requests of that person.

The effect of sure­ty­ships and guar­an­tees under busi­ness rescue.

Dur­ing busi­ness res­cue pro­ceed­ings a guar­an­tee or sure­ty­ship by a com­pany or per­son may not be enforced against the com­pany in busi­ness res­cue, except for with the leave of the court.

A busi­ness res­cue plan.

A busi­ness res­cue plan once imple­mented may pro­vide that a cred­i­tor has agreed to the dis­charge of the whole or a por­tion of the debt owing and the cred­i­tor will then lose the right to enforce the rel­e­vant debt or part thereof against the company.

Fur­ther­more a cred­i­tor is not enti­tled to enforce any debt owed by the com­pany imme­di­ately before busi­ness res­cue unless it is pro­vided for in the plan.

Back to Business Rescue

Go to top