Abstract
LL.M. (Corporate Law)
This dissertation analyses certain key areas of concern relating to creditor participation during business rescue proceedings under Chapter 6 of the Companies Act 71 of 2008 (“the Act”).
Creditors are key stakeholders during business rescue proceedings, and their rights should be adequately protected. This dissertation will place emphasis on the general rights afforded to creditors, their rights to vote on the adoption or rejection of a business rescue plan, the enforcement and ranking of their claims during business rescue proceedings, and the rights afforded to creditors of company to enforce their claims against sureties in favour of a company that has been placed under business rescue.
This dissertation seeks to answer the question: Are creditors’ rights adequately protected during business rescue proceedings?
By using the doctrinal research methodology, it will be pointed out that creditors’ rights in respect of the aforementioned topics are not adequately protected and that legislative intervention is needed.
It will be submitted that the voting rights afforded to creditors in terms of Section 145 (4) are unclear and can possibly lead to certain creditors being prejudiced when their right to vote is exercised.
The ranking afforded to creditors during business rescue proceedings is of further concern. In this regard, it will be argued that the ranking of pre-commencement creditors’ claims are negatively impacted by the ranking of post-commencement creditors.
Lastly, the rights that creditors have against sureties in favour of a company under business rescue will be analysed. It will be submitted that legislative intervention is required to provide clarity on the enforceability of the right of a creditor to claim outstanding debt due and owing by a company under business rescue from its surety.