The impact of business rescue proceedings on the rights of creditors

Abstract

The South African Companies Act of 2008 introduced business rescue in Chapter 6 of the Companies Act 71 of 2008. In terms of section 7 (k) of the Companies Act 71 of 2008, business rescue proceedings should provide for the efficient rescue and recovery of financially distressed companies in a manner that balances the rights and interest of all affected persons, inter alia, the creditors, employees, and shareholders. This dissertation will focus on the impact of business rescue proceedings on the rights and interests of creditors as one of the affected persons during the proceedings. The dissertation will analyse whether the rights of the creditors are adequately protected and if so, to what extent are they protected. The research paper will further consider the impact of the moratorium on the rights of creditors. Generally, during business rescue proceedings, all legal proceedings against the company are prohibited by the general moratorium and this includes claims by creditors. Last but not least, the business rescue regime in the international jurisdictions such as the United Kingdom and Australia will be explored in comparison with the South African law. The reason behind the choice of the above-mentioned jurisdictions is that they both share commonwealth heritage strategy with South Africa and they have existing business rescue regimes with objects almost similar to the South African regime.