Abstract
Business rescue was introduced in commercial law space many years ago and it has proven to be an important consideration when dealing with distressed companies. Whilst there are other critical factors in business rescue, post-commencement finance (PCF) has arguably been labelled as largely unsuccessful. The role and impact of PCF in the business rescue process is vital and remains one of the critical considerations in ensuring that business rescue objectives are well attained.
Recent developments in case law have been instructive in exposing legislative gaps and practical challenges faced by business rescue practitioners during the business rescue process, particularly in relation to the uncertainty surrounding the respective rights of pre-commencement and post-commencement creditors in the consideration and adoption of the business rescue plan proposed by the appointed business rescue practitioner. It is quite evident from recent case law that the relevant legislation is silent on whether or not a post-commencement financier is to be regarded as a creditor during the business rescue proceedings, and, if so, whether such a financier have any voting rights in the adoption of the business rescue plan. It is further noted that relevant legislation does not contain a definition of the term “creditor/s”.
These legislative gaps pose challenges for business rescue practitioners and / or other relevant stakeholders when they apply the law during the business rescue process. It is imperative that the rights of post-commencement creditors in the business rescue process be clarified and legislative requirements be amended and updated to ensure consistent and standard application of statutory requirements.