Nedbank Ltd v Pilisanani Trading Enterprise 59 CC and Another (1301/2020P) [2021] ZAKZPHC 34 (18 June 2021)

Key Facts

Issues

• The court evaluated if there was no reasonable prospect of rescuing the first respondent under s130(1)(a)(ii). Despite the proposed business rescue plan, evidence showed the company's financial position deteriorated significantly during the 20-month period, with minimal payments to creditors and no formal adoption of the plan. The applicant argued this rendered the business rescue exercise a delaying tactic.
• The court considered whether the first respondent's resolution to initiate business rescue proceedings on 20 June 2019 was validly set aside under s130(1)(a)(iii) of the Companies Act due to failure to comply with s129(3)-(4) procedural requirements (timely notification to affected persons). The respondents argued the Commissioner condoned the late compliance via Regulation 166, but the applicant contended this did not cure all deficiencies.

Holdings

• The order to set aside the resolution also brings to an end the business rescue proceedings in terms of s132(2)(a)(i) of the Act.
• The resolution taken by the first respondent to voluntarily begin business rescue proceedings is set aside in terms of s130(5)(a) of the Companies Act due to no reasonable prospect of rescuing the company.
• The appointment of the second respondent as business rescue practitioner is set aside.

Remedies

• The costs of the application, including any reserved costs, shall be paid by the first and second respondents jointly and severally, the one paying the other to be absolved.
• In the result the appointment of the second respondent as the business rescue practitioner for the first respondent is set aside.
• The resolution taken by the first respondent in terms of s129 of the Companies Act 71 of 2008 on 20 June 2019 to voluntarily begin business rescue proceedings is hereby set aside in terms of s130(5)(a) of the Act.
• For the sake of clarity it is declared that in terms of s132(2)(a)(i) of the Act the order contained in para 1 hereof also brings to an end such business rescue proceedings.

Legal Principles

• The court applied the standard of proof requiring the respondents to demonstrate, by a preponderance of probabilities, that the business rescue plan had been adopted to disqualify the applicant under s130(1).
• The court interpreted Regulation 166(2) using a purposive approach, concluding the Commissioner had the discretion to condone late compliance with s129(3) and (4), reviving the business rescue process.
• The court held that the respondents failed to establish on a preponderance of probabilities that the business rescue plan was adopted, thereby not disqualifying the applicant from seeking to set aside the resolution.

Precedent Name

Cited Statute

• Companies Act 71 of 2008
• Companies Regulations, 2011

Judge Name

Passage Text

• [49] ... the financial position of the first respondent has markedly deteriorated during the period of its alleged currency and it does not appear that there is any reasonable prospect of the first respondent being rescued and avoiding ultimate liquidation.
• [33] ... the applicant was therefore not disqualified in terms of s130(1) from moving for an order setting aside the resolution.
• [50] ... I have come to the conclusion that the applicant has established ... grounds for the setting aside of the resolution in terms of s130(1)(a)(ii) on the basis that there is no reasonable prospect of the first respondent being rescued.