Thorts - How to break up with your business rescue practitioner

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Thorts - How to break up with your business rescue practitioner

Published Date: 2019-10-11 | Source: DealMakers | Author: Kerri Wilson and Natalie Harten

Thorts - How to break up with your business rescue practitioner

As with any new relationship, your relationship with your business rescue practitioner will likely have commenced with a sigh of relief and hope for the future (of your company). However, as time goes on, the lustre may have worn off and you may have begun to realise that the relationship, which was once mutually beneficial, is now toxic. While you may feel that all is lost and that your Company is forced to ride out the storm until it is rescued (with a bit of luck), there is hope.

Notice of Substantial Implementation

There are various mechanisms in the Companies Act, 2008 which provide for an extension of the business rescue process (this may become problematic for directors who crave the return of control of their company). However, what happens to a company in business rescue where the business rescue plan has been substantially implemented but the business rescue practitioner refuses to file a notice of Substantial Implementation with the Companies and Intellectual Properties Commission (that is, the business rescue practitioner refuses to break up with the company concerned)?

If discussions with the company's business rescue practitioner bear no fruit in terms of terminating the business rescue proceedings in circumstances where the business rescue plan has been substantially implemented, and the company therefore ought to come out of business rescue, the directors of the company, and any interested and affected parties (such as a shareholder or creditor of the company, a registered trade union representing the employees of the company or any employee of the company not represented by a trade union), may apply to a court for relief in terms of s152(8) of the Companies Act.

Essentially, s152(8) states that it is mandatory for a business rescue practitioner to file a notice of substantial implementation of the business rescue plan when the plan has been substantially implemented. Therefore, the business rescue practitioner has no choice but to file the requisite notice and place the company back into the control of the directors.

Removal of business rescue practitioner

While enforcing your rights in terms of s152(8) of the Companies Act may, in certain circumstances, be an effective break-up method, we suggest that, frequently, the most effective way for an "affected person" to permanently end a relationship with a business rescue practitioner who is resting on his or her laurels is s139.

Section 139(2) provides an affected person with an opportunity to apply to court to remove a business rescue practitioner on, inter alia, the following grounds:

  1. Incompetence or failure to perform the duties of a business rescue practitioner of the company;
  2. Failure to exercise the proper degree of care in the performance of the business rescue practitioner's functions;
  3. Failure to satisfy the qualification requirements set out in s138(1) of the Companies Act; and
  4. Conflict of interest or lack of independence.

In light of this, should a company find itself in circumstances where a business rescue practitioner refuses to end the relationship, all is not lost; the provisions of s152(8) and s139 of the Companies Act provide some (much needed) relief.

Kerri Wilson is a Director and Natalie Harten an Associate with Falcon & Hume.

This article first appeared in DealMakers' sister publication Without Prejudice


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