Business Rescue in South Africa: A Comprehensive Guide

Understanding Business Rescue in South Africa: A Comprehensive Guide

By: Kasper Brits – Brits Law Inc.

Published Monday, 22 April 2024


In South Africa, business rescue has emerged as a critical legal mechanism to rehabilitate financially distressed companies while preserving value and protecting stakeholders’ interests. This article aims to provide a comprehensive overview of business rescue, including its definition, initiation process, duration, and procedural intricacies.

What is Business Rescue?

Business rescue is a statutory process under Chapter 6 of the Companies Act 71 of 2008, aimed at rehabilitating financially distressed companies to prevent liquidation and promote their continued existence and sustainability. It provides a legal framework for the company to restructure its affairs, operations, debts, and other obligations under the supervision of a business rescue practitioner (BRP).

Initiating Business Rescue:

Business rescue proceedings is usually initiated voluntarily by the company’s board of directors or shareholders. It can also be instituted involuntarily by affected parties such as creditors, employees, or trade unions. The decision to commence business rescue must be supported by a resolution adopted by the company’s board of directors or, in the case of involuntary proceedings, by an application to the court.

Voluntary Initiation:

The board of directors resolves that the company is financially distressed and reasonably unlikely to pay its debts when due. A resolution is passed to place the company under business rescue, and a notice is filed with the Companies and Intellectual Property Commission (CIPC). A qualified and experienced business rescue practitioner (BRP) is appointed to oversee the process.

Involuntary Initiation:

Affected parties file an application with the court, supported by evidence demonstrating the company’s financial distress. The court considers the application and may grant a business rescue order if satisfied that the company meets the criteria for business rescue.

Duration of Business Rescue:

The duration of business rescue can vary depending on the complexity of the company’s financial situation, the effectiveness of the restructuring efforts, and other factors. However, the Companies Act provides specific timelines to ensure expediency in the process:

  • The initial business rescue plan must be published within 25 business days of the BRP’s appointment.
  • The business rescue proceedings must be completed within three months, with the possibility of extensions approved by affected parties or the court.
  • If the business rescue plan is approved, the company continues under business rescue until the plan is fully implemented, or until it is terminated or converted into liquidation proceedings.


The BRP conducts a comprehensive assessment of the company’s financial affairs, operations, and viability. A business rescue plan is formulated, outlining strategies for restructuring the company’s debts, operations, and assets to achieve solvency and sustainability. The BRP engages with affected stakeholders, including creditors, employees, shareholders, and trade unions, to solicit input and negotiate terms of the business rescue plan. Creditors’ meetings are convened to vote on the proposed plan, with approval required from the majority of creditors by value and number.

If the business rescue plan proposed by the business rescue practitioner (BRP) is not agreed to by a majority of the creditors, it can lead to several potential outcomes depending on the specific circumstances of the case and the provisions of the Companies Act 71 of 2008. Here are some possible scenarios:

In some cases, if the initial business rescue plan does not receive the required majority approval from the creditors, the BRP may engage in further negotiations with the stakeholders to address their concerns and revise the plan accordingly. The BRP may seek to amend certain terms, provide additional information, or offer alternative proposals to gain support for the plan.

The Companies Act allows for extensions of the business rescue proceedings beyond the initial three-month period if necessary to facilitate the approval of a viable business rescue plan. The BRP may apply to the court or seek consent from the affected parties to extend the timeline for the development and approval of the plan.

If it becomes evident that a viable business rescue plan cannot be approved or implemented, the business rescue proceedings may be terminated. The termination of business rescue effectively ends the restructuring efforts and may result in the company being placed under liquidation proceedings, where its assets are realised and distributed among the creditors according to the liquidation hierarchy.

In cases where the business rescue plan is rejected or the business rescue process fails to achieve its objectives, the court may order the conversion of the business rescue proceedings into liquidation proceedings. This typically occurs when there is no reasonable prospect of rescuing the company as a going concern and liquidation is deemed to be in the best interests of the creditors and stakeholders. Alternatively, if the company’s directors or shareholders determine that the business rescue efforts are not feasible or desirable, they may opt to voluntarily wind up the company and initiate liquidation proceedings. This decision may be made if the company’s financial position deteriorates further or if there is a lack of consensus among the stakeholders regarding the way forward.

Implementation and Monitoring:

Upon approval of the business rescue plan, the BRP oversees its implementation, including restructuring debt, renegotiating contracts, and implementing operational changes. The BRP monitors the company’s progress, reports to stakeholders, and makes necessary adjustments to ensure compliance with the plan and statutory obligations.

The Moratorium:

The moratorium refers to a temporary suspension or prohibition on certain legal actions such as initiating or proceeding with court summons or proceedings, against the financially distressed company. The moratorium is intended to provide the company with breathing room and protection from creditors legal actions while it undergoes the business rescue process. 

The primary purpose of the moratorium is to afford the company under business rescue protection from legal actions that could undermine or disrupt the restructuring efforts. It aims to create a conducive environment for the business rescue practitioner (BRP) to formulate and implement a viable rescue plan without undue pressure or interference from creditors, shareholders, or other parties.

The moratorium typically encompasses a broad range of legal actions and proceedings, including but not limited to:

  • Legal proceedings for the enforcement of claims or judgments against the company, such as debt recovery actions, foreclosure proceedings, or liquidation applications.
  • Execution or attachment of the company’s assets by creditors to satisfy their claims or obligations.
  • Termination or cancellation of contracts, leases, or agreements entered into by the company, unless with the consent of the BRP or approval of the court.
  • Any act to enforce or realise security over the company’s assets, including repossession or sale of secured assets.

The moratorium takes effect upon the commencement of the business rescue proceedings and remains in force throughout the duration of the business rescue process, subject to certain exceptions and limitations. It provides immediate relief to the company by halting pending legal actions and preventing new actions from being initiated against the company without the consent of the BRP or approval of the court.

Exceptions and Limitations: While the moratorium provides broad protection to the company, certain exceptions and limitations may apply:

Certain types of legal actions or proceedings may be exempted from the moratorium if they are deemed essential for the effective administration of justice or for the protection of specific rights or interests. The moratorium does not suspend or invalidate pre-existing contractual obligations or liabilities incurred by the company prior to the commencement of the business rescue proceedings. Creditors may seek relief from the moratorium under exceptional circumstances, such as where their rights are unfairly prejudiced or where there is evidence of abuse or misconduct by the company or the BRP. The moratorium provides the company with a period of stability and protection to facilitate the development and implementation of a business rescue plan. It allows the BRP to assess the company’s financial position, negotiate with creditors, restructure debts, and explore restructuring options without the threat of immediate legal action. Additionally, the moratorium may encourage creditors to cooperate with the business rescue process and participate in the formulation of a mutually acceptable rescue plan. Overall, the moratorium plays a crucial role in safeguarding the interests of the financially distressed company and its stakeholders during the business rescue process.

The Payment Waterfall:

The payment waterfall refers to the priority order in which the proceeds from the realisation of assets or the restructuring of debts after initiation of the business rescue proceedings are distributed among the various creditors and stakeholders of the financially distressed company. The payment waterfall is outlined in Section 141 of the Companies Act 71 of 2008 and plays a crucial role in determining the allocation of funds to different classes of creditors and stakeholders.
Here’s a breakdown of the typical payment waterfall:

Costs of Business Rescue: The first priority in the payment waterfall is to cover the costs and expenses directly associated with the business rescue process. This includes the fees and expenses incurred by the business rescue practitioner (BRP), legal fees, administrative costs, and any other expenses necessary for the successful execution of the business rescue proceedings.

Post-Commencement Finance: If the company obtains financing or credit facilities during the business rescue process to fund its operations or restructuring efforts, the repayment of these post-commencement finance obligations typically takes precedence over other claims. This provision incentivizes creditors to provide financing to support the company’s rehabilitation efforts.

Employee Claims: Employees are afforded special protection under the payment waterfall. They are entitled to receive certain outstanding employment-related claims, such as unpaid wages, salaries, leave pay, and retrenchment benefits, up to a specified limit. These claims rank ahead of most other unsecured creditors but are subordinate to the claims of secured creditors.

Preferent Creditors: Certain creditors are classified as preferent creditors and are entitled to preferential treatment in the payment waterfall. Preferent creditors typically include government authorities and regulatory bodies, such as the South African Revenue Service (SARS), which may have claims for outstanding taxes, VAT, or other statutory obligations.

Secured Creditors: Secured creditors hold security or collateral over specific assets of the company, such as property, equipment, or inventory. In the payment waterfall, secured creditors are entitled to receive proceeds from the realisation of their collateral before other creditors are paid. The extent of their claims depends on the value of the secured assets and any applicable security agreements.

Unsecured Creditors: Unsecured creditors are those without any specific security or priority claim over the company’s assets. They rank lower in the payment waterfall and are entitled to receive distributions only after the claims of secured creditors, employees, and preferent creditors have been satisfied. Unsecured creditors may include trade creditors, suppliers, service providers, and other general creditors.

Shareholders: Shareholders are the owners of the company and hold equity interests in the business. In the event of liquidation or winding-up proceedings following unsuccessful business rescue attempts, shareholders typically rank last in the payment waterfall and may only receive distributions after all other creditor claims have been settled. In many cases, shareholders may not receive any distributions if the company’s assets are insufficient to cover its liabilities.

It’s important to note that the specific order and priority of claims in the payment waterfall may vary depending on the circumstances of each case, the terms of any financing or security agreements, and the provisions of the business rescue plan as voted for and approved in a creditors meeting. Additionally, the ultimate distribution of proceeds to creditors and stakeholders is subject to the discretion of the business rescue practitioner and oversight by the relevant stakeholders and the court.

In Conclusion:

Business rescue in South Africa provides a vital lifeline for financially distressed companies, offering an alternative to liquidation and a chance for rehabilitation and recovery. The process is very useful and attractive to a company that is financially distressed at one instance and in danger of looming liquidation or litigation for outstanding debts while at the same time having good prospects in future to earn enough income to settle such debts. The process is in many ways similar to debt counselling proceedings which is the process used for an individual who is financially distressed rather than a company. 

The business rescue process is however abused in some cases and there have been many instances in court where such abuse will not be tolerated. If you need to place your company under business rescue or need to address a company under business rescue that abuses the process, contact Brits Law for assistance.

How to Improve Your Chances of Getting Bond Approval.

Tips for Improving Your Chances of Getting Bond Approval in South Africa

By: Kasper Brits – Brits Law Inc.

Published Monday, 30 January 2024.


Securing a bond is a critical step in making your dream home a reality. However, navigating the bond approval process can be daunting, especially if you’re unfamiliar with the intricacies of the system. At Brits Law, we specialise in real estate law and conveyancing services, and we understand the importance of securing a bond for our clients. In this article, we’ll discuss several tips to help improve your chances of getting bond approval in South Africa.

1. Maintain a Good Credit Record:

2. One of the first things lenders consider when evaluating your bond application is your credit history. A good credit record demonstrates to lenders that you’re a responsible borrower who is likely to repay the loan on time. To improve your credit record:

  • Pay your bills on time. Many people are unaware of the fact that even making a rental payment late by two days through a real estate agent will result in that agency flagging your late payment on your credit record. The same counts for most other monthly recurring payments that you may make.
  • Keep your credit card balances low.
  • Checking your credit profile too regularly actually influences your credit record negatively.
  • Applying for credit too often influences your credit record negatively.
  • Maintain a balance between assets and liabilities on your monthly expenses and make sure your bank is aware of all your large asset payments.
  • Have at least some sort of monthly account which you pay by debit order. If you have no debt, you will not necessarily have the best credit score. Having a simple cell phone bill that is paid on time will be better than someone who has no rolling debit orders on their bank account in some cases. The banks need to see how you cope with credit and if there is no history of credit, they would not be able to assess your risk to them.

3.Use a Bond Originator: Bond originators act as intermediaries between you and the banks, helping you find the best bond deal for your needs. They have relationships with multiple lenders and can negotiate on your behalf to secure competitive interest rates and favourable terms. Here’s how bond originators can assist you:

  • They streamline the application process, saving you time and effort.
  • They have access to a wide range of bond products, increasing your chances of approval.
  • They provide expert advice and guidance throughout the entire process.

4. Consider Co-Signing with a Spouse: If you’re having trouble qualifying for a bond on your own, consider asking your spouse or partner to co-sign the application with you. Co-signing essentially means that both parties are equally responsible for repaying the loan. Here’s how cosigning can benefit you:

  • Combining both incomes can increase your overall affordability.
  • If one applicant has a stronger credit profile than the other, it can help offset any weaknesses in the application.
  • It demonstrates to lenders that there’s added security in the form of joint responsibility.

5. Save for a Larger Deposit: A larger deposit not only reduces the amount you need to borrow but also demonstrates to lenders that you’re financially disciplined and committed to the purchase. Here’s why a larger deposit can work in your favour:

  • It reduces the lender’s risk, making you a more attractive borrower.
  • It may improve your loan-to-value ratio (LTV), which can result in better interest rates and lower monthly repayments.
  • It gives you more negotiating power when discussing terms with the bank.

6. Seek Pre-Approval Before House-Hunting: Getting pre-approved for a bond gives you a clear understanding of how much you can afford to borrow, which can help you narrow down your property search and make competitive offers. Here are the benefits of seeking pre-approval:

  • It shows sellers that you’re a serious buyer with the financial means to purchase their property.
  • It speeds up the buying process since much of the paperwork has already been completed.
  • It gives you peace of mind knowing that your financing is in place when you find the perfect home.

7. Don’t apply for other finance at another institution while you are waiting for your final bond approval:

  • We see many people make the mistake of applying for car finance after they have applied for a home loan. The inevitable result of this is usually that the bond application will be declined.

In conclusion, securing bond approval in South Africa requires careful planning and preparation. By maintaining a good credit record, using a bond originator, considering co-signing with a spouse, saving for a larger deposit, and seeking pre-approval before house-hunting, you can significantly improve your chances of success. At Brits Law, we’re dedicated to helping our clients navigate the complexities of the real estate market. Contact us today to learn more about our conveyancing services and how we can assist you in achieving your homeownership goals.

Empowering Consumers: Understanding and Exercising Your Rights in South Africa

Empowering Consumers: Understanding and Exercising Your Rights in South Africa

By: Johan Vermeulen – Brits Law Inc.

Published Thursday, 25 January 2024.


In the vibrant landscape of South Africa’s diverse consumer market, understanding and asserting your rights is crucial for a fair and transparent marketplace. The protection of consumer rights not only ensures a level playing field but also contributes to a healthier, more sustainable economy. Let’s look at some of the key aspects of consumer rights in South Africa, and how they can protect you.

The Consumer Protection Act (CPA)

At the forefront of consumer rights in South Africa is the Consumer Protection Act, signed in 2009. This legislation is designed to empower consumers, promote responsible business practices, and enhance consumer confidence. The CPA provides a consistent and comprehensive legislative and enforcement framework, covering various aspects related to consumer transactions and agreements. These include fair marketing practices, the right to privacy, and protection against unfair marketing and business practices.

Right to Fair and Honest Dealing

One of the most important tools for shielding customers from unsolicited marketing messages is the Consumer Consumers in South Africa have the right to fair and honest dealing in the marketplace. This includes protection against misleading advertising, false product claims, and deceptive practices. Businesses are obligated to provide accurate information about their products and services, allowing consumers to make informed decisions.

Right to Privacy

The protection of personal information is a fundamental consumer right. The CPA outlines strict guidelines for the collection, storage, and use of personal data by businesses. Consumers have the right to know how their information is being used and can opt out of direct marketing communications.

Right to Safe and Quality Goods

Consumers are entitled to products that are safe, of good quality, and fit for their intended purpose. If a product fails to meet these standards, consumers have the right to return or exchange it within a reasonable time. Manufacturers and suppliers are also held accountable for any defects or hazards associated with their products.

Right to Fair and Responsible Marketing

Businesses are required to engage in fair and responsible marketing practices. This includes avoiding false or misleading representations and refraining from unfair business practices. Consumers have the right to accurate information, and businesses should not exploit vulnerable individuals or use coercive tactics. This can also include unwanted sms’s, telephone calls, letters or ‘spam’ email.

Right to Fair and Reasonable Terms & Conditions

The CPA protects consumers from unfair contract terms. Standard form contracts must be transparent, written in plain language, and not contain terms that unreasonably favor the supplier. Any financial obligations must be clearly outlined and itemized. Consumers have the right to challenge unfair contract terms and seek redress.

Recourse and Remedies

In the event of a breach of consumer rights, individuals have various recourse options. This may include seeking a refund, replacement, or repair of a defective product. The National Consumer Commission (NCC), as well as the National Consumer Tribunal(NCT) play a crucial role in enforcing consumer protection laws, and consumers can lodge complaints with these regulatory bodies.

Understanding and exercising consumer rights in South Africa is essential for fostering a robust and equitable marketplace. The Consumer Protection Act serves as a powerful tool to empower consumers and hold businesses accountable. By being informed and assertive, consumers play a vital role in shaping a fair and responsible economy that benefits everyone. Remember, your rights as a consumer are not just privileges; they are the foundation of a balanced and ethical marketplace.



By: Kasper Brits–  Brits Law Inc.

Published Wednesday, 27 June 2023, 19:04 PM 


Cybercrime is on the rise and the global result thereof is that there is an increase in the duty of care a business needs to maintain when communicating via email with its clients. Very little case law existed in this field until recently when a surge of reported matters have been dealt with on appeal in court.

During January 2023 in the case of Hartog v Daly, the court determined that an attorney was responsible for the funds he inadvertently paid into the wrong bank account. A fraudster gained unauthorized access to an email exchange between the attorney and his client, and subsequently sent the attorney an email posing as the client, providing instructions to transfer the funds into the fraudster’s account. Since the email appeared to originate from his client, he mistakenly transferred the funds to the fraudsters account, believing it to be his client’s. In this matter the attorney challenged the bank but ultimately failed in this attempt as it was established that the bank had followed the proper procedure to open the bank account to which the moneys have been paid. This case set a precedent that if a person does not do proper due diligence before making payment, the other parties right to claim the outstanding amount from that person lasts, notwithstanding the fact that the money had been stolen by a fraudster.

Few businesses maintain the appropriate security measures when sending out emails, particularly when large amounts of money are being discussed and requested.


Furthermore, in January 2023, a significant legal case known as Hawarden v ENS Inc unfolded in the Johannesburg High Court, where one of the nation’s largest law firms was entrusted with the role of conveyancers. Regrettably, due to a breach in their email security, the firm became liable for reimbursing a property purchaser a substantial sum of R5.5 million. This situation arose when the compromised emails led the purchaser to mistakenly making a payment into a fraudulent bank account which was changed on the firms pdf document. The court mentioned that there are numerous security measures which may have prevented a compromise in their emails such as:

  • Implementing DMARC and SPF on their systems,
  • Encrypting documents and using OTP’s to transfer sensitive information such as banking and payment information,
  • Listing the firms bank account as a public recipient at the bank rather than using account numbers,
  • Informing clients of the risks involved with making large payments and to follow a secure procedure
  • Accurately confirming bank details telephonically.

The above case was published via email by the legal practice council to each firm in the country and resulted in a panicked attempt by some to address their liability. Numerous law firms responded by adding a disclaimer on their email signatures stating that their clients must call to confirm banking details before making payment. In our opinion the disclaimer alone will not be sufficient to rise to the standards as set in the above case.

At this stage the latest standard in duty of care which is set in the ENS matter only relates to legal practitioners, however, time will tell if this obligation toward security will spread to other businesses. The same precedents have already been set in the financial service industry as well and the international trend points to businesses being liable toward their clients when their business or even their clients emails have been compromised. Our courts tend to follow the trend of international law and internationally, the law is in line with the precedents as set in both of the above new court matters so any new matters or appeals  in these matters will likely not bring a significant change.



Our firm has seen an influx of clients who need assistance in recovering their money from illusive cybercriminals. These individuals can be very hard to track down and as such any negligent and compromised business is held responsible instead.

We already mentioned a few possible security measures which may be implemented /  followed. In addition thereto:

  • Everyone needs to be weary of the risks involved with business email compromise.
  • Adequate insurance to cover any losses due to cybercrime should be kept by certain businesses.
  • Make sure you partner up with a trustworthy business that has adequate security measures in place before going on large financial transactions through / with them.

In our opinion as well as that of top internet security professionals your business can never be 100% protected from email compromises. Even the famous Hillary Clinton and Joe Biden’s emails have been compromised and leaked after a successful cyberattack / hacking attempt on their emails. These individuals have some of the latest technology and procedures to ward against this threat and still failed against an ever evolving enemy.

We expect the year ahead to surely provide more caselaw and developments in this field as numerous similar cases are being appealed and brought to court.

If you have suffered damages due to business email compromise from your service provider, get in contact with one of our legal practitioners for assistance.

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