Business Rescue, Restructuring & Insolvency News
More newsBusiness rescue with an ulterior purpose
A financially distressed company facing a liquidation application may be tempted to try and avoid or delay the inevitable by launching a business rescue application in order to suspend the liquidation process. However, if there is no merit in such an application, it will inevitably be found by the courts to be an abuse of process and the stratagem will thus be doomed to failure. The Supreme Court of Appeal in the case of PFC Properties (Pty) Ltd v Commissioner for the South African Revenue Services and Others (543/21; 409/22) ZASCA 111; (1) SA 400 (SCA) (21 July 2023) adjudicated precisely thisscenario.
The extent of business rescue practitioners’ powers to suspend a company’s contractual obligations
Chapter 6 of the Companies Act 71 of 2008 (Companies Act) confers various powers on business rescue practitioners (BRPs) once they have assumed their responsibilities to restructure the affairs of a company that has been placed under business rescue. This is achieved through the temporary supervision of the company, and the management of its affairs, business and property, by the BRP; a temporary moratorium on the rights of claimants against the company or in respect of property belonging to the company or lawfully in the possession of the company; and the development and implementation, if approved, of a business rescue plan to rescue the company by restructuring its affairs, amongst other things.
The interplay between set-off and post-liquidation debt
Can a creditor that has realised its security in terms of section 83(3) of the Insolvency Act, 1936 claim set-off of a post-liquidation debt owed to it by an insolvent estate or company in liquidation against the amount of the proceeds of the realisation of the secured property that it is obliged to pay to the liquidator in terms of section 83(10) of the Insolvency Act? The High Court indicated that the answer is “ No ” and, inter alia , ordered the creditor to pay the amount of the net proceeds of the realised security to the joint liquidators. The interplay between set-off and post-liquidation debt was therefore considered by the Supreme Court of Appeal in Emontic Investments (Pty) Ltd v Bothomley NO and Others (1123/2022) ZASCA 1 (9 January 2024).