Find the right local SA attorney now!


Article by listed AttorneyNanika Prinsloo

Read Also: Who can act as a Business Practitioner

Read Also: Business Rescue: How Does it Work?


This article will examine what a Company must to begin the Business Rescue Proceedings (“the Proceedings”).


Section 129 of the Companies Act, Act 71 of 2008, determines that the board of a Company may resolve that the Company must begin the Proceedings, if the board reasonably believes that the Company is financially distressed, and that there appears to be a reasonable prospect of rescuing the Company.

If the Company is not financially distressed, it cannot go under Business Rescue.  Also, if there is no reasonable prospect that the Company can be rescued by placing itself under Business Rescue, then the Company cannot place itself under Business Rescue.  A lot of times Companies place themselves under Business Rescue only to discover that the Company is, in fact, insolvent and should rather have liquidated.


Once the Board of the Company has decided that the Company is indeed financially distressed and that the Company place itself under Business Rescue, then the Board can adopt a Resolution (“the Resolution”) to start the Proceedings. The shareholders of  the Company cannot make this decision and the Board of Directors does not have to consult with the shareholders in this decision either. This way there is no delay and the Board of Directors can make a decision that is in the interest of the Company fast.   It must be the Board as a whole that makes the decision and not individual directors.

This Resolution may not be adopted if any liquidation proceedings have been initiated by or against the company.  (To adopt a Resolution means that once the Board has accepted the decision, a document is prepared which sets out the date, time and place of the meeting of the meeting, and what was decided. In this case it will set out that the Board has decided to place the Company under Business Rescue.  This is then signed by the Company Secretary. It is an official document of the Company.)


A Company is regarded as financially distressed the Company will most probably not be able to pay all of its debts on the due and payable dates within the next six months.  A Company is also regarded as insolvent if the financial show that the Company may most likely become insolvent during the next six months.


The timing of making the decision to place the Company under Business Rescue is imperative, because if the Company takes the decision too soon (before the Company is in financial distress) then the Resolution may be set aside.  If the Resolution is effected too late, then the Company may already be insolvent and then the Company may not be placed under Business Rescue but must liquidate. 


The Resolution will have no force or effect until it has been published.  With the publishing of the Resolution, it is meant that the Company must send a notice of the Resolution, as well as its effective date, together with an Affidavit which sets out the facts and the grounds upon which the Resolution was founded.  This must be sent to the Companies and Intellectual Property Commission (CIPC). (The Company Board will have made the decision as to from which date when the Business Rescue proceedings will begin – this is the effective date.)

The Company must also send a copy of the Resolution to each affected person.  “Affected person” are, inter alia, creditors, employees and unions and representatives of employees). 


The Resolution must be published within FIVE days after the Board has adopted it.


The Company must also appoint a Business Rescue Practitioner within five days of taking the Resolution.  The Business Rescue Practitioner must satisfy the requirements as set out in Section 138 of the Companies Act.  In return, the Practitioner must consent in writing to accept the appointment.  Read our article on the requirements that a Business Rescue Practitioner must comply with .


Once the Business Rescue Practitioner was appointed by the Board, and the Practitioner accepted the appointment, the Company must file a notice of the appointment of the Practitioner within two business days after making the appointment with CIPC and must send a copy of the notice of appointment to each affected person within five business days after the notice was filed with CIPC.

If the Company fails to publish the appointment as discussed in the previous paragraph, then the Resolution to begin Business Rescue proceedings lapses and is a nullity.  Even worse, the Company may then also not file a further resolution to place the Company under Business Rescue for a period of three months after the date on which the lapsed resolution was adopted.  The Company can however bring an application to Court to approve a further Resolution that the Company has taken during such a restricted time and the Court may grant an order to confirm such a Resolution.


If a Company has adopted a Resolution to place the Company under Business Rescue,  the Company may not adopt a resolution to begin liquidation proceedings, unless the Resolution to place the Company under Business Rescue has lapsed, or after the Business Rescue proceedings have ended.

(Read our article on the Liquidation of a Company )


Business rescue proceedings end when the Court has either set aside the Resolution to place the Company under Business Rescue. If the Business Rescue proceedings were begun as a result of a Court order, the Court can set aside that Court order.

If the Court converts the Business Rescue proceedings to liquidation proceedings, the Business Rescue process ends.