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September 6, 2019


Introduction to business rescue proceedings

In simple terms, business rescue proceedings take place when a company becomes financially distressed, and 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 it appears to be reasonably likely that the company will become insolvent within the immediately ensuing six months.

When does a company get placed under business rescue?

There are two ways in which a company can be placed under business rescue, namely:

  1. when the board of directors of a company decides that the company may voluntarily begin business rescue proceedings and be placed under the supervision of a business rescue practitioner in terms of section 129 of the Companies Act, 2008 (“Act”); or
  2. when an affected person (see below who these persons are) makes a formal application to court for an order placing the company under supervision and commencing business rescue proceedings (section 131 of the Act), as long as the company has not previously been put under business rescue proceedings in terms of section 129 of the Act as above.

What is the aim of business rescue proceedings?

Business rescue proceedings are aimed at rehabilitating a company that is financially distressed. The main aim of the proceedings is to get a business rescue practitioner to restructure the affairs of a company so that it increases the likelihood of a company to continue existing on a solvent basis so that it may be able to pay off any debts that are due or that may become due.

Who is a business practitioner?

A business rescue practitioner is a person appointed, or two or more persons appointed jointly, to oversee a company during business rescue proceedings.

According to Section 138 of the Act, a person may be appointed as a business rescue practitioner if he/she-

  1. is a member in good standing of a legal, accounting or business management profession and who is accredited by the Companies and Intellectual Property Commission (“CIPC”);
  2. is not subject to an order of probation in terms of section 162(7) of the Act;
  3. would not be disqualified from acting as a director of the company in terms of section 69(8) of the Act;
  4. does not have any other relationship with the company which would lead a reasonable and informed third party to conclude that the relationship compromises that person’s integrity, impartiality or objectivity; and
  5. is not related to a person who has a relationship with the company which would lead a reasonable and informed third party to conclude that the relationship compromises that person’s integrity, impartiality or objectivity.

What is the role of a business rescue practitioner?

The business rescue practitioner who satisfies all the requirements of section 138 of the Act must be appointed within 5 business days after a company has adopted and filed a resolution (if the company commences business rescue proceedings voluntarily). If the business rescue proceedings commence by way of an order of court, the court may appoint an interim business rescue practitioner. The business rescue practitioner is required to reduce the debt in order to enable that the company continues trading on a solvent basis. He/she is required to investigate the company’s affairs, and financial situation, and thereafter a business rescue plan must be drawn up by the business rescue practitioner which will then be put to vote by the creditors of the company.

Once it is successful, the business rescue practitioner must then follow through the proposed plan and attempt to save the company.

How does the business rescue process unfold?

Once a company commences business rescue proceedings either voluntarily (section 129 of the Act) or by an order of a court (section 131 of the Act), the following actions are suggested by the Act:

  1. The practitioner must investigate the affairs of the company as soon as possible after the being appointed (section 141);
  2. Within 10 business days after being appointed, the practitioner must then convene a meeting with the creditors as well as the employees and advise them of the proposed business rescue plan of rescuing the company (sections 147 and 148);
  3. Within 25 business days, the company must publish the business rescue plan which was planned by the practitioner (section 150);
  4. Within 10 business days the business rescue practitioner must arrange a meeting with the creditors and/or any others who have a voting interest, considering the proposed plan (section 151).

What happens if the Practitioner discovers that the company cannot be rescued?

If at any time during business rescue proceedings, the business rescue practitioner determines that there is no reasonable prospect for the company to be rescued, then he/she has to then inform the court, as well as the company, and all the affected parties which are the shareholders, creditors, employees, or a registered trade union representing employees of the company.

The business rescue practitioner must then apply to the Court for an order to discontinue the business rescue proceedings and the Company must be placed into liquidation.

When does business rescue proceedings end?

In terms of section 132 of the Act business rescue proceedings end when:

  1. The court sets aside the resolution or order that began the business rescue proceedings or when the court converts business rescue proceedings into liquidation proceedings;
  2. The business rescue practitioner files a notice of termination of business rescue proceedings with the CIPC; and
  3. A business rescue plan has been suggested and rejected and no affected person has acted to extend the proceedings in any manner contemplated by the Act or a business rescue plan has been adopted and the business rescue practitioner has subsequently filed a notice of substantial implementation of the plan.


  5. The Companies Act 71 of 2008.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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