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Companies Act, 2008 (Act No. 71 of 2008)

Chapter 6 : Business Rescue and Compromise with Creditors

Part A : Business rescue proceedings

130. Objections to company resolution

 

 

1) Subject to subsection (2), at any time after the adoption of a resolution in terms of section 129, until the adoption of a business rescue plan in terms of section 152, an affected person may apply to a court for an order—
a) setting aside the resolution, on the grounds that—
i) there is no reasonable basis for believing that the company is financially distressed;
ii) there is no reasonable prospect for rescuing the company; or
iii) the company has failed to satisfy the procedural requirements set out in section 129;
b) setting aside the appointment of the practitioner, on the grounds that the practitioner—
i) does not satisfy the requirements of section 138;
ii) is not independent of the company or its management; or
iii) lacks the necessary skills, having regard to the company’s circumstances; or
c) requiring the practitioner to provide security in an amount and on terms and conditions that the court considers necessary to secure the interests of the company and any affected persons.

 

2) An affected person who, as a director of a company, voted in favour of a resolution contemplated in section 129 may not apply to a court in terms of—
a) subsection (1)(a) to set aside that resolution; or
b) subsection (1)(b) to set aside the appointment of the practitioner appointed by the company,

unless that person satisfies the court that the person, in supporting the resolution, acted in good faith on the basis of information that has subsequently been found to be false or misleading.

 

3) An applicant in terms of subsection (1) must—
a) serve a copy of the application on the company and the Commission; and
b) notify each affected person of the application in the prescribed manner.

 

4) Each affected person has a right to participate in the hearing of an application in terms of this section.

 

5) When considering an application in terms of subsection (1)(a) to set aside the company’s resolution, the court may—
a) set aside the resolution—
i) on any grounds set out in subsection (1); or
ii) if, having regard to all of the evidence, the court considers that it is otherwise just and equitable to do so;
b) afford the practitioner sufficient time to form an opinion whether or not—
i) the company appears to be financially distressed; or
ii) there is a reasonable prospect of rescuing the company,

and after receiving a report from the practitioner, may set aside the company’s resolution if the court concludes that the company is not financially distressed, or there is no reasonable prospect of rescuing the company; and

c) if it makes an order under paragraph (a) or (b) setting aside the company’s resolution, may make any further necessary and appropriate order, including—
i) an order placing the company under liquidation; or
ii) if the court has found that there were no reasonable grounds for believing that the company would be unlikely to pay all of its debts as they became due and payable, an order of costs against any director who voted in favour of the resolution to commence business rescue proceedings, unless the court is satisfied that the director acted in good faith and on the basis of information that the director was entitled to rely upon in terms of section 76(4) and (5).

 

6) If, after considering an application in terms of subsection (1)(b), the court makes an order setting aside the appointment of a practitioner—
a) the court must appoint an alternate practitioner who satisfies the requirements of section 138, recommended by, or acceptable to, the holders of a majority of the independent creditors’ voting interests who were represented in the hearing before the court; and
b) the provisions of subsection (5)(b), if relevant, apply to the practitioner appointed in terms of paragraph (a).