Abstract
LL.M. (Commercial Law)
South African company law has seen many changes in respect of corporate rescue, due to inter alia globalisation, increase in open trade, instant and freer communication and the need for better regulation of companies and stakeholders. As a result, the previous rescue mechanism of judicial management was widely criticised and poorly implemented. The Companies Act 71 of 20081 has however now replaced judicial management with business rescue.
Business rescue encompasses many facets, most importantly the moratorium in section 133. Section 133 has already, and will even more so in future, have a dramatic impact on the launching or continuation of any legal or enforcement proceedings against a company undergoing business rescue, the status and enforceability of its contracts and the rights of affected parties (ie creditors, shareholders and directors).
This study will discuss the general nature and effects of rescue moratoria and the moratoria (or lack thereof) created under the Companies Act 61 of 1973,2 the 2008 Companies Act and the administration procedure in England. The moratorium under each relevant rescue procedure will be analysed according to its purpose, nature, effects and procedure. As such, this study will attempt to set out why the section 133 moratorium is the cornerstone to the business rescue procedure and vital in securing the turnaround of the company.
The section 133 moratorium will, to a great extent, determine whether business rescue is a saving grace in South Africa. I will discuss why I welcome business rescue (and its moratorium) and consider it an improvement on judicial management, but also what I regard as its inherent weaknesses. This study will conclude with my proposals regarding prudent amendments that have to be made to the 2008 Companies Act.