Business Rescue

Section 129 of the Companies Act 71, 2008

In today’s economic climate Business Rescue is being used as a shield to protect cash strapped companies from being liquidated providing them with an opportunity to recover from their liquidity issues. CDV Attorneys will guide our clients in the two ways that a company may be placed into Business Rescue, one of which is in regard to a Section 129 Resolution (in terms of the Companies Act 71, 2008).

The effects of being placed under Business Rescue in terms of Section 129 of the Act are as follows:

• The Business Rescue practitioner will be deemed to be the director of the company;
• There is a moratorium on all litigation against the company;
• The Business Rescue practitioner conducts the affairs of the business and holds creditors’ meetings to vote on the business plan going forward; and
• Business Rescue proceedings do not prevent the removal of goods or repossessing movables pursuant to an order obtained on the basis that the company is in unlawful possession of such goods.

Section 131 of the Companies Act 71, 2008

In addition to a company being placed in Business Rescue in terms of Section 129 of the Act, an application to place the company under Business Rescue can be made to court by affected persons. These include company shareholders, employees of the company, trade unions and creditors of the company.

A formal application is made to court wherein the affected party would be required to show the following:

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

Once a Business Rescue application is filed and served on the company, its employees, all registered trade unions, CIPC and SARS, as well as the creditors of the company are notified of the Business Rescue application in terms of the Act, the company is deemed to be placed under Business Rescue.

Business rescue considerations

• There is a moratorium on all litigation against the company from the date that all creditors of the company are notified of the application to commence with Business Rescue.
• No Business Rescue practitioner is appointed until such time as a court order is granted.
• In the event that there is a pending liquidation application against the company, the company may no longer be placed under Business Rescue in terms of Section 129 of the Act, and companies that wish to be placed under Business Rescue will be obliged to launch an application in terms of Section 131 of the Act.