The abuse of business rescue proceedings while liquidation proceedings are pending

Abstract

In South Africa, section 131(6) of the Companies Act enables an affected person to make an application for a company to commence with business rescue proceedings while liquidation proceedings are in progress. The effect of section 131(6) is that the business rescue application immediately suspends the liquidation proceedings that have already commenced. This may lead to an abuse of business rescue. An abuse of business rescue proceedings would be a contradiction to several objectives of the Act. One objective, in particular, is to provide for the ‘efficient rescue and recovery of financially distressed companies, in a manner that balances the rights and interests of all relevant stakeholders.’