Contact
News

Can a close corporation go under business rescue?

“I have a construction business that is operated in a close corporation. As we have not had much work during the last few months, my business has come under severe financial pressure. I still believe in the business and know things will pick up again, but right now we just don’t have the cashflow to pay our creditors. I’m considering business rescue but am unsure whether that option is available seeing as my business is a close corporation?”

The dramatic effect of the past few months has taken a heavy toll on many businesses, with all businesses having to make plans for their continued operation and even survival in the short term. An option considered in particular by many companies is engaging business rescue proceedings. 

The mechanism of business rescue is provided for in the Companies Act 71 of 2008 (“Companies Act”) and offers formal options and processes to assist financially distressed companies in navigating their way out of such distress and to ensure the continuation of the business and the protection of its stakeholders.

Practically, this involves the appointment of a business rescue practitioner who develops and supervises the implementation of an approved business rescue plan to regulate, amongst other things, the property, debt, affairs and liabilities of the business. Essentially the business is placed under temporary supervision and management for the duration of the proceedings and a temporary suspension is imposed on the rights of creditors and all existing and possible claims against the business or its property.

With the introduction of the new Companies Act, close corporations, essentially became redundant. Consequently, no new close corporation may be incorporated as of the date of enactment of the new Companies Act. Existing close corporations may however still continue to exist and conduct business and continue to be regulated by the Close Corporation Act, with certain provisions of the Companies Act finding application to close corporations. In particular it is provided for in the Close Corporations Act that business rescue proceedings as dealt with in the Companies Act will apply to all existing close corporations.

Therefore, the answer to your question is ‘yes’ you can initiate business rescue proceedings in respect of your close corporation and such proceedings would follow the provisions of the Companies Act. To assist you with business rescue proceedings, it is advisable that you consult your attorney or an experienced business rescue practitioner for guidance on the correct way to proceed.

June 10, 2020
The implications of a waiver of rights by directors

The implications of a waiver of rights by directors

by | Sep 2, 2024 | , ,

The Supreme Court of Appeal (“SCA”) recently handed down a judgement in what has been cited as a ‘landmark case’ in respect of the waiver of directors’ rights and the impact of such waiver on a company. In this article, we look at what a ‘waiver’ of rights in terms of a contract entails and what the effect of such a waiver by directors may have on a company, specifically concerning debts owed to the company.

Consistency is key for Homeowners Associations

Consistency is key for Homeowners Associations

by | Sep 2, 2024 | , ,

With communal living being the preference for many, issues arising from these regulated environments are to be expected. This demands that the regulatory bodies entrusted with running the communal living environments demonstrate consistency in the application of their rules and standards concerning their constituents. In this article, we look at the conduct of a Homeowners Association that failed to act consistently in the application of its rules.

Sign up to our newsletter

Pin It on Pinterest