Article by listed Attorney: Nanika Prinsloo
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Section 151 of the Companies Act, Act 71 of 2008, determines that the Practitioner must hold a meeting and prescribes when the meeting must be held, who can attend and what procedures must be followed. This article will discuss this meeting.
As soon as the appointed Business Rescue Practitioner has published the Business Rescue Plan that he/she drafted, he/she must convene and preside over a meeting of creditors and any other holders of a voting interest in the Company that is being placed under Business Rescue. Read our article on the Section 129 Resolution to place the Company under Business Rescue, which explains the adoption of a Resolution and the appointment of the Business Rescue Practitioner. Also read more about the role of the Business Rescue Practitioner,
The purpose of this meeting is to consider the Business Rescue Plan.
The Business Rescue Practitioner must deliver a notice of the meeting to all affected persons at least five business days before the meeting.
The Companies Act defines an “affected person” as the following:
(a) a shareholder or creditor of the Company, or
(b) any registered trade union representing the employees of the Company; or
(c) each of the employees; or
(d) each of their respective representatives.
This notice to the affected persons, must contain the following:
(a) the date, time and place of the meeting;
(b) the agenda of the meeting; and
(c) a summary of the rights of the affected persons to participate in and vote at the meeting.
At the meeting the Business Rescue Practitioner must-
(a) introduce the proposed Business Rescue plan for consideration by the creditors and, if applicable, by the shareholders;
(b) inform the meeting whether the Practitioner continues to believe that there is a reasonable prospect of the Company being rescued;
(c) provide an opportunity for the employees’ representatives to address the meeting;
(d) invite discussion, and entertain and conduct a vote, on any motions to-
(i) amend the proposed plan, in any manner moved and seconded by holders of
creditors’ voting interests, and which is satisfactory to the Practitioner; or
(ii) direct the Practitioner to adjourn the meeting in order to revise the plan for further consideration; and
(iii) call for a vote for preliminary approval of the proposed plan, as amended if applicable, unless the meeting has first been adjourned in accordance with paragraph (d)(ii).
In a vote, the proposed Business Rescue plan will be approved on a preliminary basis if-
(a) it was supported by the holders of more than 75 percent of the creditors’ voting interests that were voted; and
(b) the votes in support of the proposed plan included at least 50 percent of the independent creditors‟ voting interests, if any, that were voted.
If a proposed Business Rescue plan was not approved on a preliminary basis, the Plan is rejected, and may be considered further only in terms of section 153 of the Companies Act, Act 71 of 2008.
Section 153, in short, states that the Practitioner can, where the Business Rescue plan is rejected, seek a vote of approval from the holders of voting interests to prepare and publish a revised plan; or he/she can advise the meeting that the Company will apply to a Court to set aside the result of the vote by the holders of voting interests or shareholders, as the case may be, on the grounds that it was inappropriate.
Where the Business Rescue Plan was rejected, and the Practitioner does not take any action as set out in the preceding paragraph, then any affected person present at the meeting may also either call for a vote of approval from the holders of voting interests requiring the Practitioner to prepare and publish a revised plan; or apply to the Court to set aside the result of the vote by the holders of voting interests or shareholders, as the case may be, on the grounds that it was inappropriate.
Also, any affected person, or combination of affected persons, may make a binding offer to purchase the voting interests of one or more persons who opposed adoption of the Business Rescue plan, at a value independently and expertly determined, on the request of the Practitioner, to be a fair and reasonable estimate of the return to that person, or those persons, if the Company were to be liquidated.
If the Practitioner or an affected person, informs the meeting that an application will be made to the Court as contemplated in those provisions, the Practitioner must adjourn the meeting for five business days, unless the contemplated application is made to the Court during that time; or until the Court has disposed of the contemplated application.
If, on the request of the Practitioner, or a call by an affected person as discussed above, the meeting directs the Practitioner to prepare and publish a revised Business Rescue plan, then the Practitioner must conclude the meeting after that vote; and prepare and publish a new or revised Business Rescue plan within ten business days. The revised Business Rescue Plan must again then be published (filed with CIPC) and sent to all affected parties.
If an affected person or combination of affected persons make a binding offer to purchase the voting interests of one or more persons who opposed adoption of the Business Rescue plan, at a value independently and expertly determined, which, on the request of the Practitioner, seems to be a fair and reasonable estimate of the return to that person, or those persons, if the Company were to be liquidated, then the Practitioner must do the following:
(a) adjourn the meeting for no more than five business days, as necessary to afford the Practitioner an opportunity to make any necessary revisions to the Business Rescue plan to appropriately reflect the results of the offer; and
(b) set a date for resumption of the meeting, without further notice, at which the provisions of section 152 and Section 153 of the Companies Act will apply afresh. (Section 152 sets out the process that must be followed to adopt the Business Rescue Plan and Section 153 describes the process that must be followed if the business Rescue Plan was rejected. These two sections are the topic of this article).
If the Business Rescue Plan was rejected and neither the Practitioner nor and affected person takes any action as described in this article, then the Practitioner must promptly file a notice of the termination of the Business Rescue proceedings with CIPC.
A holder of a voting interest, or a person acquiring that interest in terms of a binding offer, may apply to a Court to review, re-appraise and re-value a determination by an independent expert.
The Court may order that the vote on the Business Rescue plan be set aside if the Court is satisfied that it is reasonable and just to do so, having regard to the interests represented by the person or persons who voted against the proposed Business Rescue plan.
If the Business Rescue plan was adopted, it is binding on the Company, and on each of the creditors of the Company and every holder of the Company’s securities, whether or not such a person-
(a) was present at the meeting;
(b) voted in favour of adoption of the plan; or
(c) in the case of creditors, had proven their claims against the Company.
The Company, under the direction of the Business Rescue Practitioner, must take all necessary steps to-
(a) attempt to satisfy any conditions on which the Business Rescue plan is contingent; and
(b) implement the plan as adopted.
To the extent necessary to implement an adopted Business Rescue plan the Practitioner may, in accordance with that plan, determine the consideration for, and issue, any authorised securities of the Company, and if the Business Rescue plan was approved by the shareholders of the company, the Practitioner may amend the Company’s Memorandum of Incorporation to authorise, and determine the preferences, rights, limitations and other terms of, any securities that are not otherwise authorised, but are contemplated to be issued in terms of the Business Rescue plan.
When the Business Rescue plan has been substantially implemented, the Practitioner must file a notice of the substantial implementation of the Business Rescue plan with CIPC.
Please read our other articles on Business Rescue for further information.