Abstract
The 1st of May 2011 marked the coming into effect of the Companies Act 71 of 2008. This legislation introduced a business rescue model which is aimed at assisting financially ailing entities to trade out of insolvency. As one of the express purposes of the Act is to facilitate the efficient rescue of financially distressed companies (s 7(k)), a court will give preference to business rescue over liquidation, but only in circumstances where there is a genuine attempt to achieve the aims of the Act. Even though the introduction of chapter 6 of the Companies Act 71 of 2008 is laudable, due to the significant role that it plays in resuscitating financially troubled companies, it also serves to protect defaulting debtors against creditors by putting a moratorium on legal proceedings during the subsistence of business rescue proceedings. This advantage of a moratorium on legal proceedings has led to the widespread misuse and abuse of business rescue proceedings by some debtors. This moratorium effectively provides a debt holiday for defaulting debtors, and by so doing, the general body of creditors is disadvantaged. As a result of this increasing abuse of the business rescue model, our courts have become rigorous and pedantic when deciding business rescue applications. To the extent that the courts see it befitting to say that vague and speculative allegations will not suffice when proving reasonable prospects of rescue. This dissertation will address the issue of the loopholes in the statutory framework of the business rescue procedure, and how it renders it susceptible to abuse. Furthermore, the dissertation will provide recommendations on how to remedy this defect, in order to avert the continued abuse of the business rescue procedure.