The introduction of business rescue proceedings by Chapter 6 of the Companies Act, No 71 of 2008 (Act) created uncertainty on various levels, in particular the extent and nature of certain rights previously enjoyed by creditors.

Our courts are making progress in finding a path through the muddy waters in this regard and every day a judgment is delivered that sheds some light on previous uncertain propositions.

Since 1956, legislation has required suretyship agreements to be embodied in a written document. A suretyship agreement involves three parties; simplistically if A does not pay B, then C will. C will step into the shoes of A and perform A’s obligations for them.

The recent administration of heavily indebted Uganda Telecom Limited (“UTL”) aims to achieve the best outcome for creditors and shareholders. Below, we unpack the implications of the administration for UTL’s creditors and other stakeholders.

A Melomed Finance (Pty) Ltd (In Liquidation) v Harris Jeffrey (SGHC Case no: 2016/A5028) (Judgment handed down 23 June 2017)

The South Gauteng High Court, sitting as a court of appeal, recently handed down a judgment to the effect that a verbal acknowledgement of debt when made at an enquiry held into the affairs of a company, in terms of s417 and s418 of the Companies Act, No 61 of 1973 (s417 enquiry), can be used as evidence in subsequent civil litigation to recover the amount so acknowledged.

In Ex Parte Nell and Others NO 2014 (6) SA 545 (GP) (28 July 2014), the board of a company passed a resolution placing it in business rescue in accordance with s129 of the Companies Act, No 71 of 2008 (Companies Act). In terms of this section, a financially distressed company may, without any prior judicial oversight or consultation with its creditors, achieve a general moratorium against legal proceedings.

“Whenever any person (hereinafter called the insurer) is obliged to indemnify another person (hereinafter called the insured) in respect of any liability incurred by the insured towards a third party, the latter shall, on the sequestration of the estate of the insured, be entitled to recover from the insurer the amount of the insured’s liability towards the third party but not exceeding the maximum amount for which the insurer has bound himself to indemnify the insured” – s156 of the Insolvency Act, No 24 of 1936 as amended (Act).

BUSINESS RESCUE, RESTRUCTURING AND INSOLVENCY: THE COURT’S POWER TO SET ASIDE THE DISSENTING VOTE OF A CREDITOR IN BUSINESS RESCUE PROCEEDINGS If satisfied that it is reasonable and just to do so, a court may set aside a dissenting vote on a business rescue plan. In Collard v Jatara Connect (Pty) Ltd & Others [2017] ZAWCHC 45, the court did exactly that. Explaining his decision, Judge Dlodlo stated that there should be no reason to prefer a winding up application over a business rescue plan that will pay the employees of the company in full and result in a better return for creditors.

Once legal proceedings relating to a debt have started, does the subsequent substitution of one of the parties affect the prescription period for the debt? This was the crux of the recent Supreme Court of Appeal (“SCA”) case of Sentrachem Limited v Terreblanche.

A substitution occurs when a party to legal proceedings is replaced by another party, with no effect on the cause of action.

In the case of First Rand Bank Limited v KJ Foods CC (in business rescue) (734/2015) [2015] ZA SCA 50 (26 April 2017), the main issue that the Supreme Court of Appeal (SCA) had to determine was whether the High Court of Pretoria (Court a quo) was correct in setting aside a vote by the appellant, FirstRand Bank Limited (FNB), against the adoption of a business rescue plan (plan) on the basis that it was reasonable and just to do so in terms of s153(7) of the Companies Act, No 71 of 2008 (Act).

It is now generally accepted that the Companies Act, No 71 of 2008 (Act) is an overhaul of our corporate law landscape. This shift is even more evident with the introduction of a new business rescue regime and along with it, the general moratorium on legal proceedings against a company in business rescue.

Section 133 of the Act provides that no legal proceedings including enforcement action may commence or continue against a company undergoing business rescue, save where amongst other exceptions, consent is granted by the court or obtained from the business rescue practitioner.