Abstract
The initiation of the Companies Act 71 of 2008 (the Act) has fundamentally changed South African company law and consequently there is still a there is a lot of grey areas and uncertainty which is yet to be cleared up by the courts in their interpretation of the current law by interpreting the law.
The Act in chapter 6 introduces the concept of business rescue which provides for the rescue and rehabilitation of financially distressed companies from distress and ultimately liquidation proceedings. Prior to the adoption of the business rescue regime, financially distressed companies in South Africa had limited alternatives to their disposal. Companies now have the option to adopt and follow a rescue proceedings plan if the company is in financial distress and needs assistance in saving it from insolvency and ultimately liquidation proceedings.
This mini-dissertation looks at the decision of the Supreme Court of Appeal in Richter v Absa Bank Limited, the application for business rescue during liquidation proceedings, inter alia the provisions of section 131(6) of the Act, and the abuse of business rescue by entities in an effort to starve liquidation and frustrate creditors. The Act does not define the concept liquidation proceedings and/or what it entails and court decisions that grappled with its meaning in this context have reached divergent conclusions. The mini-dissertation concludes that the ambiguity created by the confusing use of the terminology in section 131 is a cause for concern and consequently a judicial amendment and/or an explanatory note is long overdue.
LL.M. (Corporate Law)