The liability of sureties in terms of section 154 of the Companies Act 71 of 2008

Abstract

The focus of the research is on section 154 of the Companies Act 71 of 2008. The legal effect of section 154 upon the approval and implementation of a business rescue plan related to the liability of sureties is of significant practical importance. The provisions in this section are not drafted with enough clarity to enable creditors and debtors involved in business rescue proceedings to determine the liability of the sureties of a company in business rescue. Statutory provisions preventing creditors from recovering debts owed to them, from either the debtor or surety, might lead to reluctance on the part of creditors to provide funding to companies. The lack of clarity might lead to further and/or continued litigation in the courts, where creditors claim recovery of debts from sureties in terms of suretyship agreements. This research critically considers the liability of sureties considering various courts decisions concerning section 154.