Litigation & dispute resolution services

What happens to litigation that is pending against the Company at the time that it goes into business rescue?

Generally speaking, all litigation that is pending against the Company at the time the Company goes into business rescue will be stayed except:

• with the written consent of the business rescue practitioner;
• with leave of the court in accordance with any terms the court considers suitable;
• as a set-off against any claim made by the company in any legal proceedings, irrespective of whether those proceedings commenced before or after the business rescue proceedings began;
• criminal proceedings against the company or any of its directors or officers;
• proceedings concerning any property or right over which the company exercises the powers of a trustee; or
• proceedings by a regulatory authority in the execution of its duties after written notification to the business rescue practitioner.

Can a company in business rescue be sued?

No litigation can be instituted against a company in business rescue except:

• with the written consent of the business rescue practitioner;
• with leave of the court in accordance with any terms the court considers suitable;
• as a set-off against any claim made by the company in any legal proceedings, irrespective of whether those proceedings commenced before or after the business rescue proceedings began;
• criminal proceedings against the company or any of its directors or officers;
• proceedings concerning any property or right over which the company exercises the powers of a trustee; or
• proceedings by a regulatory authority in the execution of its duties after written notification to the business rescue practitioner.

Can a guarantee or surety be enforced against a Company in business rescue?

No guarantee or surety made by the company may be enforced by any person against the company that is undergoing business rescue except with permission of the court.

How are outstanding debts that are owed to the company dealt with under business rescue?

Once business rescue proceedings commence, the affairs of the company and the management thereof are placed in the supervision of the business rescue practitioner who is entrusted to develop and implement a plan of rescue. The plan to rescue the company will be focused on the restructuring of the company’s affairs, business, property, debt and other liabilities and equity in a manner that maximises the likelihood of the company continuing in existence on a solvent basis.

How does a company in business rescue go about demanding and suing for the outstanding debts?

When business rescue proceedings begin, the company continues to operate as before, under the guidance of the business rescue practitioner. Although creditors cannot sue the company under business rescue (unless one of the exceptions are applicable), the creditors will be included in the business rescue proceedings. The creditors are entitled to notices of all information relating to but not limited to, meetings, court proceedings and decisions to be taken by the business rescue practitioner. Creditors have the right to vote to amend, approve or reject a proposed business rescue plan. Creditors may also form a creditor’s committee and are entitled to consult with the business rescue practitioner during the preparation of the business rescue plan.

What happens if a claim against a Company in Business Rescue is going to prescribe?

Should any party have a claim against a Company undergoing business rescue and the enforcement of the claim is subject to a time limit or is prescribing, the running of time will be suspended for the duration of the business rescue proceedings.

How are claims submitted for proof to the business rescue practitioner?

A creditor is required to submit proof of its claim to the business rescue practitioner, who will consider the claim and is entitled to accept or reject the claim. The business rescue practitioner must receive proof of claims by creditors at the first meeting of creditors.

All claims that have been accepted by the business rescue practitioner would be included in the business rescue plan. The creditors are entitled to vote on the proposed business rescue plan at a meeting convened for the purpose of approving the business rescue plan.