Abstract
LL.M. (Commercial Law)
The introduction of Chapter 6 of the Companies Act No 71 of 2008 into the South African
corporate insolvency setting had a noteworthy impact on procedures as we knew it and replaced
its predecessor, judicial management in terms of the Companies Act no 61 of 1973. Chapter 6
provides for business rescue proceeding, its main function being to assist and rehabilitate
financially distressed companies. The significance of this chapter is that it promotes proactive
action to be taken by companies in initiating business rescue proceedings when possible
financial distress becomes apparent. Business rescue proceedings can commence by making
use of S 129 of the Companies Act No 71 of 2008 or of S 130 of the Companies Act No 71 of
2008. S 129 allows for the board of directors of the company to pass a resolution permitting
business rescue proceedings to apply to the relevant company. S 130, on the other hand, makes
provision for an affected person to apply to the High Court with a query regarding a company
and business rescue proceedings.
A remarkable number of new provisions were introduced relating to business rescue procedures
and with their introduction came the responsibility of our Courts to interpret its rightful place
within our law. As a result, the valuable question of when our courts should aim to rescue a
company and when to liquidate the company’s assets in order to settle its debts, must be asked.
Both proceedings have the same aim; that is helping the financially distressed company pay its
debts. However, both also employ vastly different methods to achieve their aims and with
different consequences. Business rescue aspires to rescue the company by restructuring its
financial arrangements in order to allow for the business of the company to be sold as a going
concern. Business rescue further aims to help the company settle all its claims against it in full.
Liquidation, on the other hand, aspires to sell all the company’s assets and divide the profit of
the sale to settle the claims of the company’s creditors. The company will thereafter be
dissolved.
This dissertation aims to analyse the suitability of business proceedings compared to
liquidation proceedings by purposefully examining the requirements for both proceedings as
well as their advantages. Furthermore, this dissertation will provide for a comparative study
between the Australian and South African business rescue proceedings respectively.