Dr Eric Levenstein unpacks the legal significance of recent successes in the business rescue space and explains why successful business rescues are an important contributor to the South African economy and where recent outcomes positively reflect the maturity of the South African business rescue framework.

Recent statistics published by StatsSA show that 225 companies were placed into liquidation in May 2026. In 2026 alone, 1116 companies have had their businesses terminated by the filing for liquidation, with the knock on effect of job losses and the closure of what were historically (for some years) sustainable and viable trading entities.

Many of these companies would have been financially distressed/insolvent for a significant period of time and where the possible rescue and restructuring of historical debt and the businesses of these companies were just left too late, and where a possible business rescue mechanism was just not considered early enough in the distressed time line of the company. The default position in these instances would be liquidation.

Liquidation unfortunately remains a very negative outcome for distressed companies in South Africa, and where we at Werksmans continue to advocate for the restructuring alternative of business rescue as a viable and workable alternative to the liquidation process.

It is vitally important that we speak (at every opportunity) about notable successes in the business rescue space and in order to ensure that we bolster and retain confidence in the business rescue mechanism which can allow for positive outcomes; namely to facilitate the rehabilitation and restructuring of a company in a manner that allows it to continue operating on a solvent basis, or failing that; to achieve a better return for creditors than what would be available in the event of the immediate liquidation of the company.

Werksmans Attorneys has been involved in two very high profile business rescue successes both of which were finalised last week and where the positive outcomes flowing from these rescues have no doubt reflected the effectiveness of the South Africa’s business rescue framework. So after 15 years since we first got our Business Rescue legislation in 2011, one needs to pause and take stock and ask oneself the important question –

Is South Africa’s business rescue framework finally coming of age?

Last week saw two significant milestones in South African business rescue. Murray & Roberts reached a major implementation milestone with the completion of its R1.27 billion Differential Capital transaction, securing approximately 2,600 jobs and preserving critical mining services businesses. At the same time, Group Five formally concluded its business rescue process after more than six years, with all secured, preferent and concurrent creditors paid in full or fully provided for, while preserving the vast majority of jobs and potentially even delivering a return to shareholders.

Together, these outcomes raise important questions about how business rescue is evolving in South Africa. Do these outcomes demonstrate that the business rescue regime is achieving what it was intended to do? What lessons can other distressed companies, lenders and investors draw from these restructurings? And what do these successes mean for confidence in South Africa’s corporate restructuring environment?

In principle, business rescue, if embraced and used at an early stage of distress, is a powerful and necessary tool for struggling companies. In many cases, by the time business rescue is considered, unfortunately, the business is no longer capable of being rescued. It is a mechanism built for intervention – not reaction –  business rescue is designed to operate at the point of financial distress, not financial collapse.

Rather than face the inevitable collapse into liquidation, if stakeholders support the business rescue practitioner and his/her efforts to restructure the debt, the companies’ workforce and its contracts in a manner that makes the business more effective and more profitable, there is no reason why the company cannot exit from its business rescue process with a credible, practical and workable plan, and where outcomes can be really good for all stakeholders. Either the company is restructured in a way that allows it to continue trading, or there is a wind down/sell off of the businesses/subsidiaries of the company to third parties which supports a financial distribution to creditors, and in some instances to shareholders, far better than one would ever have seen in a liquidation.

For the business rescue practitioner, he/she must carefully consider the requirement of the “reasonable prospect of rescue”. It requires a credible, supportable basis on which the company can be rehabilitated, whether through operational restructuring, the introduction of new capital, or a compromise with creditors. It is not satisfied by the mere hope that conditions might improve. It is up to the business rescue practitioner to persuade all stakeholders that if all parties work together, and where the business rescue plan is supported,  companies can be saved.

Looking at the outcome in Murray & Roberts and Group 5, the results speak for themselves.

Murray & Roberts

In one of the most significant corporate restructurings in recent South African history, Differential Capital Proprietary Limited and its consortium of investors, working with the company’s business rescue practitioners (Metis Strategic Advisors), concluded a transaction resulting in the acquisition of the equity of the mining division of Murray & Roberts Limited (in business rescue) for R1.27 billion.

The adopted business rescue plan gained 100% creditor approval in April 2026 and the transaction, which completed on 25 June 2026, secured the transfer of numerous local and foreign subsidiaries (in South Africa, Canada, Australia, Portugal, Chile and numerous other jurisdictions) to the Differential Capital-led consortium. The sale enables the business rescue practitioners to settle all secured debt and funding obligations. Importantly, the transaction preserves approximately 2,600 jobs and safeguards vital mining capabilities that will continue to contribute meaningfully to the South African economy.

Group 5  

In Group 5, the business rescue practitioners (Metis Strategic Advisors) of Group Five Limited and Group Five Construction Proprietary Limited (“Group Five“), announced last week the substantial implementation of their respective business rescue plans and which has now concluded their business rescue proceedings.

In March 2019, Group Five collapsed into business rescue with approximately R7 billion in creditor and contingent exposures, more than 2300 individual creditors, 119 active construction projects and close to 6000 employees employed in approximately 180 companies across 38 countries. At the time, it was estimated that an immediate liquidation of Group Five would result in secured creditors receiving as little as 65 cents in the Rand, and concurrent creditors no more than 3.4 cents in the Rand, not to mention the devastating impact that a liquidation would have on employment and the construction industry generally. At that time, there was no prospect for any shareholder recovery.

Group Five’s business rescue proceedings took the form of a structured wind down, with projects being completed, debtors being recovered, and key subsidiaries such as Intertoll Europe and Everite, being sold as going concerns. Over 60 entities and asset sales were completed within the business rescue process, and where a substantial number of jobs were retained.

As Dave Lake from Metis put it: “the process has over-achieved in its primary objectives:  maximising recoveries for creditors and lenders, saving jobs, and business entities, settling tax obligations, unlocking some value for shareholders, while stabilising and restructuring a highly complex group in an orderly manner“.

Various issues in the administration of the business rescue proceedings were dealt with, including resolution of litigation with certain shareholders, resolution of various creditors’ claims, as well as attending to other commercial aspects, which included the conclusion of financing agreements, and the disposal of Group Five’s subsidiaries and/or businesses.

In what is an incredible success story for business rescue in South Africa, not only have all creditors, including concurrent creditors, been paid in full (100 cents in the Rand), but it is expected that a surplus return will be delivered to shareholders as well. This is an exceptional outcome for a business rescue process.

In summary

The value of business rescue as a mechanism in South Africa cannot be ignored. Where it is used as the statute intended, it remains a workable option for a proactive and well-considered restructuring strategy. Business rescue remains one of the most effective mechanisms for preserving value in the South African economy and provides a structured framework within which businesses can reorganise, negotiate with stakeholders and, where necessary, compromise debts and gain access to new capital.

So, as we have seen in the Murray & Roberts and Group 5 examples, business rescue can work – it is a robust and effective mechanism focused on saving South African companies from complete financial and operational collapse.

It is hoped that in time to come, we will see more and more companies exit from business rescue on a similar basis, with job preservation being key and where companies (either as restructured or with new owners) can continue to contribute to the South African economy in a positive and meaningfully way.

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Business rescue has become a cornerstone of South African corporate insolvency law. Introduced by Chapter 6 of the Companies Act 71 of 2008 (“the Act”), it seeks to rehabilitate financially distressed companies while preserving value for creditors, employees and shareholders. For creditors seeking to place a company under supervision, boards of distressed entities may try to obstruct the process, which runs the risk of undermining the purpose of business rescue proceedings.

A recent judgment of the North West Division of the High Court provides important guidance on two deceptively simple but significant questions: when does voluntary business rescue actually commence, and can a voluntary business rescue be used to thwart a pending compulsory business rescue application? The judgment provides welcome certainty for creditors and reinforce the integrity of South Africa’s business rescue framework.

Zizwe Open Cast Mining Proprietary Limited (“Zizwe“) rendered contract mining services to Lethabo Minerals Proprietary Limited (“Lethabo“), a holder of a mining right over a chrome mine near Rustenburg. Following the termination of their commercial relationship, Lethabo acknowledged that there was a substantial debt owing to Zizwe that remained unpaid. Zizwe instituted an urgent compulsory business rescue application under section 131(1) of the Act.

Lethabo filed an answering affidavit that was conspicuously limited in scope. The answering affidavit failed to dispute either the indebtedness or its quantum and produced no financial information demonstrating solvency or a viable path to recovery. Furthermore, Lethabo did not (at that stage) take issue with either the qualifications or the independence of the business rescue practitioner nominated by Zizwe.

Shortly before the hearing, Lethabo informed both Zizwe and the Court that Lethabo’s board had adopted a written resolution two days prior to the hearing voluntarily commencing business rescue proceedings. Lethabo stated that the requisite CoR123.1 form had been lodged with the Companies and Intellectual property Commission (“CIPC“), thereby commencing business rescue proceedings by operation of law and rendering Zizwe’s application moot.

Section 129 of the Act permits a company’s board to resolve to commence voluntary business rescue where the company is financially distressed and there is a reasonable prospect of rescuing it. The resolution must, however, be filed with the CIPC, together with the prescribed notices and supporting documentation.

First mover advantage

The first substantive issue before the Court was whether the mere electronic submission of documents to the CIPC constitutes “filing” for purposes of section 129 of the Act. At the time of the commencement of the hearing, Lethabo had uploaded the relevant documents electronically, but the CIPC had not yet reviewed, accepted or confirmed the filing. Formal confirmation from the CIPC was only issued during the course of the hearing.

In terms of section 132(1) of the Act, business rescue proceedings commence either when (1) a company files a resolution to place itself under supervision in terms of section 129(3) of the Act or (2) an affected person applies to court for an order placing the company under supervision in terms of section 131(1). In relation to the latter instance, previous court decisions have held that in order for a compulsory business rescue application to be made, the application must be issued by the Registrar, served on the company and CIPC, and that affected persons are notified.

Zizwe’s counsel argued that Chapter 6 of the Act prohibits a board from passing a voluntary business rescue resolution as contemplated in terms of section 129 once a compulsory application is made. While the Court did not agree with this contention, it did accept that the Act does not permit parallel business rescue processes. Instead, the commencement date of business rescue proceedings is critical because it informs the date of inception of the moratorium, the practitioner’s authority and the rights of creditors.

Section 129(2)(b) of the Act sets out that a board resolution to commence business rescue is of no force and effect until it has been filed with the CIPC. In this regard, CIPC Practice Note 3 of 2021 was issued in terms of regulation 4 of the Regulations to the Act, which confirms that the date of filing of business rescue will be the date that the relevant information is confirmed as correct by a member of the CIPC team. Furthermore, a confirmation letter from the CIPC is required before a voluntary business rescue resolution can be considered filed, within the meaning of section 129(2)(b). In this case, the CIPC certificate of confirmation was only forthcoming during the hearing, and clearly indicated a commencement date subsequent to the date on which Zizwe’s compulsory business rescue application was made.

Tactical or abusive?

The Court considered whether the manner in which Lethabo’s board acted constituted an abuse of the business rescue procedure. In circumstances where Lethabo’s board had been aware of the pending business rescue application for at least two weeks prior to the hearing, and where Lethabo’s answering affidavit did not mention any intention to pursue voluntary business rescue or an objection to Zizwe’s nominated practitioner, the Court was unsurprisingly critical of Lethabo’s conduct.

The Court found this conduct constituted an abuse of process: the resolution was adopted not in genuine pursuit of rehabilitation, but as a tactical manoeuvre to retain control over the identity of the business rescue practitioner and to derail the court-driven proceedings. As such, the Court held that it was just and equitable to set aside the resolution commencing the business rescue proceedings.

Conclusion

The judgment has several practical implications. First, boards of directors creditors should not assume that a board resolution or proof of electronic submission is sufficient to commence business rescue proceedings. They should verify that the CIPC has formally accepted and confirmed the filing. Second, boards seeking to secure a tactical advantage by adopting a resolution to thwart a compulsory business rescue application must understand that this is a high risk and low reward strategy. Third, the judgment confirms that Chapter 6 is not a tactical instrument: directors who invoke it for purposes other than genuine rehabilitation expose themselves to adverse findings.

Ultimately, this decision reinforces the procedural integrity of business rescue, while providing much-needed certainty for creditors, companies and practitioners alike.

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Business rescue was introduced as a mechanism to rehabilitate financially distressed companies and preserve value. In practice, however, it is often invoked only once liquidation is imminent. This article considers how the defensive use of business rescue, rather than its application as a proactive restructuring tool, materially undermines its prospects of success, with many processes effectively constrained before they begin.

Chapter 6 of the Companies Act 71 of 2008 introduced business rescue as a mechanism to rehabilitate financially distressed companies. Its purpose is clear, to facilitate the restructuring of a company in a manner that allows it to continue operating on a solvent basis or, failing that, to achieve a better return for creditors than immediate liquidation.

In principle, it is a powerful and necessary tool for struggling companies. In practice, however, its effectiveness is often undermined by the circumstances in which it is invoked.

In many cases, by the time business rescue is considered, the business is no longer capable of being rescued. A mechanism built for intervention – not reaction – business rescue is designed to operate at the point of financial distress, not financial collapse.

The statutory framework assumes that, while the company is under pressure, it retains sufficient operational substance and stakeholder confidence to support a restructuring process. The moratorium on creditor claims is not an end in itself; it is a tool to create space within which a viable business rescue plan can be developed and implemented.

Central to this framework is the requirement of the “reasonable prospect of rescue”. This is a substantive threshold. It requires a credible, supportable basis on which the company can be rehabilitated, whether through operational restructuring, the introduction of new capital, or a compromise with creditors. It is not satisfied by the mere hope that conditions might improve.

In the current economic environment, that threshold is increasingly difficult to meet. South African businesses are operating under sustained pressure: elevated interest rates, constrained demand, rising input costs and ongoing infrastructure challenges. In this context, financial distress is often prolonged rather than sudden. Businesses absorb pressure for as long as possible, drawing on facilities, extending creditor terms and reducing internal buffers, while the inevitable is looming.

By the time formal proceedings are considered, the position has often materially deteriorated. Business rescue is therefore frequently initiated not as part of a restructuring strategy, but as a response to imminent liquidation. Its immediate function becomes the moratorium – a means of halting enforcement action and stabilising the position.

This is a fundamental shift. A process intended to enable restructuring becomes, in effect, a defensive measure. Where business rescue is invoked in these circumstances, a critical element is often missing: a realistic pathway to rehabilitation.

The underlying business may no longer be viable on any sustainable basis. Liquidity may be exhausted. Access to additional funding (including post-commencement finance) may be limited or unavailable. Creditor relationships may already be compromised. In these conditions, the business rescue practitioner is required to formulate a restructuring plan within a set of constraints that materially limit its prospects of success.

Where business rescue is initiated early and while the business still retains operational stability, there is scope to intervene meaningfully. Funding can be secured, cost structures adjusted and stakeholder support mobilised. The process functions as intended. Where it is initiated at the point of imminent liquidation, the position is fundamentally different. At that stage, the process becomes a futile exercise, and where the restructuring of the business is left with minimal options. The business rescue practitioner then has the unenviable task of managing a business that has largely exhausted any possibility of it being successfully restructured. Value erosion has already occurred, and the ability to reverse such erosion is limited.

The distinction between those two scenarios is often the difference between a viable business rescue and an inevitable failure.

The defensive use of business rescue also shapes stakeholder behaviour. Creditors are increasingly attuned to proceedings that appear to have been initiated to delay enforcement. Where confidence in the underlying viability of the business is limited, support by stakeholders for the proposed business rescue plan is correspondingly weak.

Funders adopt a similarly cautious approach. Post-commencement finance is, by its nature, risk capital (and often unsecured). It is unlikely to be made available in circumstances where there is no clear and credible restructuring thesis. Without stakeholder alignment, the process becomes self-limiting.

These dynamics are amplified by the current economic environment. Recent increases in input costs (fuel crises) have placed sustained pressure on margins across multiple sectors. At the same time, constrained consumer demand has limited the ability of businesses to pass those costs through. The result is a gradual erosion of profitability and liquidity.

Importantly, this erosion is often not immediately visible. Businesses continue to trade, but with reduced financial flexibility and increasing reliance on short-term measures. It is within this environment that business rescue is increasingly being invoked, not at the point of manageable distress, but at the point where that accumulated pressure becomes unsustainable.

None of this detracts from the value of business rescue as a mechanism. Where it is used as the statute intended, it remains a workable option for a proactive and well-considered restructuring strategy. Business rescue remains one of the most effective mechanisms for preserving value in the South African economy and provides a structured framework within which businesses can reorganise, negotiate with stakeholders and, where necessary, compromise debts and gain access to new capital.

The issue is not the tool. It is the timing and purpose of its use.

Business rescue is too often positioned as a last line of defence. In doing so, it is expected to resolve circumstances that have already progressed beyond the point at which meaningful and successful intervention is possible.

The question is not whether business rescue works. The statutory framework is clear, and where properly applied, it is effective. The question is whether it is being used in the way contemplated by Chapter 6.

When business rescue is deployed as a defence to liquidation, or to frustrate creditors rather than as a considered restructuring mechanism, its prospects of success are inherently limited. In that sense, many business rescues do not fail because the process is flawed. They fail because, by the time they begin, the outcome is already largely determined.

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As South African companies continue to suffer from an ailing economy, and where we are seeing an increasing number of companies filing for liquidation, there is no doubt that the role and impact of the Chief Restructuring Officer (CRO) cannot be ignored.

Recent statistics released by STATS SA, confirm that 233 companies were placed into liquidation in April of this year. In 2026 alone, 891 companies have met their demise through a liquidation process. The University of Stellenbosch’s Bureau for Economic Research (BER) reported this week that the business confidence index had dropped by eight percentage points directly attributable to the price cost impact brought about by the ongoing middle east conflict. According to BER, falling confidence is a warning signal that the economy is losing momentum.

The knee-jerk rush to file for a formal business rescue process needs to be carefully considered by the boards of stressed companies. Proper consideration should first be given to the appointment of a CRO as opposed to a business rescue practitioner. This allows a CRO to take a fresh look at the business and to offer effective turnaround strategies.

Of course it will always come down to ”horses for courses” as financial pressure on the entity might be too great, requiring an urgent filing for business rescue and where the benefit of a moratorium on claims against the company provides the required breathing space needed in the restructuring process. The default position is of course a filing for liquidation, which effectively ends the life of the company with subsequent job losses and cessation of trade.

But it takes a brave director to be able to recognize a decline of the company into the abyss of financial disaster. The last thing that would be high on the board’s agenda in a cash strapped entity would be to admit a potential slide towards business failure and where they would just hold up their hands and actively look for the outside assistance of an independent supervisor, such as a CRO.

Board members of failing companies need to accept that the slow slide towards financial distress is often as a consequence of their own limited management skills in being able to trade the entity out of its financial distress. Often the fear of failure and where directors, not used to making unpopular and difficult decisions, place themselves into a proverbial “rabbit in the headlight” scenario and which makes the need for the appointment of an independent turnaround consultant even more necessary.

The risk of personal liability and opening oneself up to scrutiny by creditors after the company has filed for insolvency, should persuade directors to engage a CRO as early as possible.

A CRO would have as an objective the restructuring of the affairs and business of the company, so as to ensure that the entity can continue to trade into the future on a solvent and effective basis. To do this, the CRO needs to remain independent and do his best to make the hard decisions for the commercial benefit of the operation. The achievement of stability, being able to trade profitably, without ongoing decline are the objectives for the CRO.

A restructuring led by a CRO is aimed at delivering an entity back into the market with its debt restructured, operational and financial changes having been made, with cash burn being reduced, with prejudicial contracts renegotiated, or terminated, and with management and employees realigned to upscale business profits and upside for shareholders and stakeholders. The objective must be to maximise the returns for lenders and creditors faced with the potential fallout of massive debt write offs in the event that these companies file for business rescue or liquidation.

In the recent RT Global CRO Study (March 2026), “The CRO in Transition – Restructuring that Creates (More) Value”, conducted together with the renowned IFUS-Institute in Europe, submissions were made in support of the CRO restructuring option. RT Global submitted that ” in many crisis situations, the CRO is still brought in as a “firefighter”, far too late, and in an environment already shaped by political dynamics, and with the CRO having limited decision-making authority.”

RT Global were of the view that “the CRO office, with clear governance and real executive authority, is becoming the international standard in restructuring. The CRO mandate determines whether restructuring remains an issue of damage control – or becomes a strategic leadership tool.”

In order for South African corporates to consider the clear advantages in appointing CRO’s in failing entities, it is clear that the CRO must be brought in as early as possible and prior to significant damage having impacted the business and its ability to trade out of decline. This requires a change in mindset and where directors and management need to be mature enough to recognize the need for intervention and supervision and to do so as early as possible.

CRO’s must be given clear and concise mandates and with the required milestones in place. Targets for the achievement of both operational and financial turnaround must be set up front, so that all stakeholders are on the same page from day one.

Realistic outcomes must happen within as short a timeframe as possible, so that the turnaround can be given the best possible chance to succeed.

For South African corporates, agility in distressed situations must be a top priority and particularly so in volatile and uncertain times. The appointment of a competent CRO, that has the ability to create stability and a workable turnaround for the company must bode well for distressed companies and for the South African economy.

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The Gauteng High Court, Johannesburg, has delivered an important judgment in White Rivers Exploration Proprietary Limited v Polsun Limited, reaffirming the power of an adopted business rescue plan to fundamentally reshape a company’s equity structure. The decision will be of interest not only to business rescue practitioners, but also to lenders, investors and shareholders involved in distressed restructurings.

At its core, this case concerned a familiar commercial problem. A financially distressed company required fresh capital if it was to survive, which solution was not simply an operational turnaround or a compromise of debt. It was a full recapitalisation: all of the existing issued shares were to be cancelled and new shares issued to an incoming investor as part of the rescue funding package. The Court described this mechanism as lying “at the very heart of the restructuring” and as the commercial quid pro quo for the capital required to rescue the company.

In practice, distressed capital is often only available if the investor can enter on a clean equity footing. The judgment acknowledges that reality. Business rescue, on this approach, is not confined to preserving an existing shareholding structure while adjusting debt around the edges. It can, where the circumstances justify it, become the vehicle for a complete reset of ownership.

White Rivers Exploration (“WRE”) was placed into business rescue on 6 January 2023 by board resolution in terms of section 129(1) of the Companies Act 71 of 2008 (“2008 Companies Act”). A business rescue plan was subsequently adopted in April 2023 with the requisite statutory majorities from bother creditors and shareholders. The business rescue plan provided for an immediate capital injection of £300 000 and, critically, for a full recapitalisation of the company through the cancellation of all existing shares and the allotment and issue of 100 new ordinary shares to Lexington Gold South Africa. The business rescue plan was implemented, and a notice of substantial implementation was filed, resulting in the termination of the business rescue proceedings.

Polsun, a foreign minority shareholder WRE, sought to challenge the completed restructuring. It contended that the cancellation of its shares pursuant to the adopted and implemented business rescue plan was unlawful and unconstitutional, relying on section 25 of the Constitution. Polsun further sought to set aside the business rescue proceedings and to have its prior shareholding reinstated, effectively requiring the Court to unwind a fully implemented and terminated business rescue almost two years after the substantial implementation.

In an application for security for costs brought by WRE, the Court rejected that challenge and held that Polsun chances of success were slim. It held, first, that section 137 of the 2008 Companies Act, read together with section 152(6), expressly authorises a business rescue practitioner to cancel shares in accordance with an adopted business rescue plan. This is significant because it confirms that the power to alter securities, including an equity wipe-out and reissue, is firmly grounded in the statutory framework of Chapter 6 of the 2008 Companies Act, rather than being treated as an incidental or implied power.

Secondly, the Court reaffirmed the binding force of an adopted business rescue plan. Once the requisite statutory majorities have been obtained and the plan has been adopted, section 152(4) of 2008 Companies Act renders it binding on the company and all affected persons, whether or not they supported it. The judgment further situates this within a foundational principle of company law, namely that a shareholder (especially a minority shareholder) accepts that validly constituted majority decisions may prevail notwithstanding any adverse impact on their rights.

Thirdly, the Court rejected the constitutional attack. The complaint was not simply that Polsun had lost an asset. The issue was whether that deprivation was arbitrary. The Court held that the challenge based on section 25(1) of the Constitution could not succeed in light of section 137 of the 2008 Companies Act and the statutory scheme in Chapter 6. Put differently, where securities are altered pursuant to a law of general application and in accordance with a duly adopted business rescue plan, a constitutional challenge of this nature is unlikely to succeed absent an attack on the empowering legislation (being s 137 in this particular case).

Perhaps the most commercially significant aspect of the judgment is its treatment of finality. The Court emphasised that once a plan has been implemented and a notice of substantial implementation has been filed, business rescue terminates by operation of law under sections 132(2)(c)(ii) and 132(2)(b) of the 2008 Companies Act. At that stage, there is no longer an extant business rescue to set aside, and the completed process is not susceptible to retrospective undoing. That is a critical message for investors and creditors. Rescue transactions depend on certainty. If implemented plans could later be unravelled with ease, the willingness of third parties to fund distressed companies would be materially undermined.

The judgment also illustrates that procedure remains decisive in business rescue litigation. The Court held that Polsun’s failure to join interested shareholders and creditors was fatal. It also criticised the attempt to rely on section 172(1)(a) of the Constitution without engaging the remedial framework in section 172(1)(b), particularly given that the rescue process had already been fully implemented and time had passed before the institution of the main application.

Although the case arose in the context of an application for security for costs, the Court’s assessment of Polsun’s prospects makes the broader lesson clear. Business rescue under Chapter 6 of the 2008 Companies Act is a structured, sequential and collective process. It is designed to facilitate rehabilitation or a better return for creditors than immediate liquidation. That purpose would be frustrated if dissenting shareholders could revisit an implemented plan long after the rescue has concluded.

The decision confirms that business rescue is not just about restructuring debt or preserving existing arrangements. It can also reset ownership and control through recapitalisation, as long as the statutory process is properly followed.

For professionals in the restructuring and insolvency space, White Rivers Exploration v Polsun highlights two key points. First, equity is not protected in business rescue. Second, once a plan has been properly adopted and implemented, it is final. That finality is not just procedural but it provides the commercial certainty needed to support business rescue funding.

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A recent judgment handed down by Nyathi J in Maralco Business Advisors CC t/a Maralco Plant Services v GMK Civils Proprietary Limited [1], serves as an important reminder that liquidation proceedings are not a debt-collection mechanism where the underlying indebtedness is genuinely disputed.

The matter concerned an application for the final winding-up of GMK Civils Proprietary Limited on the basis that the company was allegedly unable to pay its debts as contemplated in section 344(f), read with section 345(1)(c), of the Companies Act 61 of 1973. The applicant alleged that the respondent was indebted to it in the amount of R817 994.50 arising from a plant rental facility allegedly concluded on a thirty-day basis and supported by a certificate of balance.

The respondent opposed the application on several grounds. Central to its defence was that its sole director neither concluded nor authorised the alleged facility agreement relied upon by the applicant. The respondent further contended that, even on the applicant’s own version, the alleged agreement was void for uncertainty because it failed to record an essential term, namely the rental rates or a mechanism by which such rental rates could be determined. On this basis, the respondent argued that the invoices relied upon by the applicant could not establish the indebtedness alleged.

The Court ultimately dismissed the winding-up application with costs, reaffirming the long-established principle set out in Badenhorst v Northern Construction Enterprises Proprietary Limited [2], namely that liquidation proceedings should not be used to enforce payment of a debt that is bona fide disputed on reasonable grounds.

Importantly, Nyathi J did not merely accept a generic allegation of dispute. The Court carefully analysed the nature of the disputes raised and found that they constituted substantive contractual disputes incapable of proper determination in motion proceedings seeking liquidation relief.

The applicant relied heavily on a certificate of balance clause as prima facie proof of indebtedness. However, the Court drew an important distinction between proof of indebtedness and proof of liability itself. Nyathi J held that while a certificate of balance may constitute prima facie proof according to its terms, it cannot conclusively establish liability where the validity and enforceability of the underlying agreement are themselves credibly challenged.

In particularly strong language, the Court held that “a certificate cannot bootstrap validity”. This is a significant statement for commercial litigants and insolvency practitioners alike. Certificate of balance clauses are routinely relied upon in commercial litigation and insolvency proceedings, particularly in matters involving facilities, running accounts, or credit agreements. The judgment makes it clear that the evidentiary value of a certificate remains dependent on the existence of a valid contractual foundation.

The Court further held that the respondent had raised a bona fide dispute on reasonable grounds regarding both authority and certainty of essential terms. In relation to authority, the respondent’s sole director squarely denied signing or authorising the agreement. Although the applicant argued that the documents emanated from the respondent’s offices, that services had been rendered and accepted, and that part-payments had been made from time to time, the Court held that these considerations did not permit the respondent’s version to be rejected on the papers.

Nyathi J specifically referred to the principles set out in Plascon-Evans Paints Ltd v Van Riebeeck Paints [3] and held that the respondent’s version could not be rejected as far-fetched or untenable.

The Court also rejected the applicant’s reliance on section 20(7) of the Companies Act 71 of 2008, which permits a person dealing with a company in good faith to presume that the company has complied with all formal and procedural requirements. While the Court accepted that this may be a relevant consideration at the level of “commercial probability”, it nevertheless found that the issue of authority remained genuinely disputed on the papers.

Equally significant was the Court’s treatment of vagueness and certainty of contractual terms. The respondent argued that the alleged agreement failed to specify either a fixed rental amount or an ascertainable mechanism by which the rental could be determined. The Court found that this was not a contrived defence. Instead, it constituted “a substantive contractual contest unsuited to motion liquidation proceedings”.

The judgment repeatedly emphasises the limited role of winding-up proceedings in the resolution of contractual disputes. Nyathi J noted that winding-up proceedings are not designed to resolve material disputes concerning the existence of indebtedness and reaffirmed that where a debt is bona fide disputed on reasonable grounds, the creditor’s remedy lies in action proceedings.

Perhaps the most striking passage in the judgment appears in paragraph 19, where the Court stated that contested issues of authority, contract formation, and essential terms should be ventilated by way of action proceedings “with oral evidence and discovery, not the blunt instrument of corporate death by winding-up”.

That phrase captures the policy rationale underpinning the Badenhorst principle. Liquidation proceedings carry severe commercial consequences and are not intended to operate as procedural leverage in ordinary commercial disputes.

Notably, however, the Court stopped short of criticising the applicant’s conduct as abusive or vexatious. Nyathi J accepted that the applicant had relied on a documentary trail, invoices, and a certificate of balance, “often invoked in commerce”. The Court accordingly refused to grant punitive costs and instead ordered costs on the ordinary party-and-party scale.

The judgment serves as a timely reminder that creditors considering liquidation proceedings must carefully assess the underlying contractual foundation of their claims before invoking the insolvency process. Disputes relating to authority, contract formation, certainty of essential terms, or enforceability may well render liquidation proceedings inappropriate, even where invoices have been rendered, services performed, and partial payments made.

For insolvency practitioners and commercial litigants alike, the judgment is a reaffirmation that the Badenhorst principle remains firmly embedded in South African insolvency law, and that the courts will continue to guard against the use of winding-up proceedings as a substitute for ordinary action proceedings.

[1] Maralco Business Advisors CC t/a Maralco Plant Services v GMK Civils (Pty) Ltd (2026) ZAGPPHC (20 April 2026).

[2] Badenhorst v Northern Construction Enterprises (Pty) Ltd 1956 (2) SA 346 (T).

[3] Plascon-Evans Paints Ltd v Van Riebeeck Paints[3] (Pty) Ltd 1984 (3) SA 623 (A).

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This article considers the recent decision in Trustees, Inkwazi Trust v Skema Holdings (Pty) Ltd and its implications for business rescue applications under section 131 of the Companies Act 71 of 2008. The judgment reinforces the principle that access to business rescue is not automatic and that courts will closely scrutinise whether a credible and factually supported basis for rescue exists. It also highlights the importance of demonstrating that the company itself, and not the wider group, is capable of rescue.

The decision in Trustees, Inkwazi Trust v Skema Holdings Proprietary Limited [1] is a measured but firm application of section 131 of the Companies Act 71 of 2008 (the “Companies Act”). It demonstrates how the existing principles will be applied where business rescue is invoked in response to sustained creditor pressure. What emerges clearly is that access to business rescue is not automatic. The Court will interrogate, at the outset, whether the statutory requirements have been properly met on the evidence provided in the application.

Section 131(4)(a) of the Companies Act 71 of 2008 provides that, after considering an application, a court may place a company under supervision and commence business rescue proceedings if it is satisfied that the company is financially distressed, or has failed to pay over any amount in terms of an obligation under or in terms of a public regulation or contract with respect to employment-related matters, or that it is otherwise just and equitable to do so for financial reasons, and that there is a reasonable prospect of rescuing the company.

In this case, the enquiry turned on whether Skema Holdings was financially distressed and whether such a prospect had been established. The Court reaffirmed that this is not a superficial exercise. While an applicant is not required to prove that rescue will succeed, there must be a proper factual foundation demonstrating a realistic and workable pathway to that outcome. Assertions that a restructuring is possible, or that value exists within a broader commercial structure, are insufficient without supporting detail. The enquiry is forward-looking, but it must be grounded in objective, ascertainable facts.

A central issue was the manner in which the applicants framed Skema Holdings’ position within the broader group of companies. Considerable reliance was placed on group-level value, including property holdings and operational activities said to exist elsewhere in the structure. The Court rejected this approach. It made it clear that the enquiry under section 131 is confined to the affairs of the company before it. The existence of value, operations or employment within the group does not, without more, establish that the company itself is capable of rescue.

Once that distinction is applied, the deficiencies in the applicants’ case become apparent. The Court was not satisfied that Skema Holdings was shown, on the founding papers, to conduct a meaningful operational business. The position regarding the “axle business”, which was relied upon as evidence of ongoing activity, was not clearly articulated at the outset. The explanation as to how that business remained attributable to Skema Holdings, only emerged after it had been challenged in opposition. This, in the Court’s view, pointed to a case that evolved in response to criticism rather than one that was properly formulated from inception.

The same difficulty arose in relation to the asset base. The proposed rescue depended materially on immovable properties, yet many of these were held by subsidiaries and were encumbered. The founding affidavit did not set out how those assets could be lawfully accessed or deployed for the benefit of Skema Holdings. Although further explanations were provided in subsequent affidavits, they did not adequately address the constraints posed by ownership structures and secured creditor rights. The Court was not persuaded that value located within the group could simply be translated into a workable rescue for the company itself.

This fed directly into the assessment of the proposed rescue strategy. The applicants relied on a combination of allegations of property realisation and prospective funding to address the company’s indebtedness. However, the evidence put up consisted largely of indicative proposals and transactions that were incomplete or conditional. The implementation of the rescue strategy depended on future events, including the cooperation of creditors and the conclusion of further agreements. The Court accepted that business rescue is inherently forward-looking, but emphasised that the proposed plan must be supported by evidence demonstrating that it can be implemented. On the facts, that threshold was not met.

The reliance on employment considerations did not alter this conclusion. While the preservation of employment is a recognised objective of Chapter 6 of the Companies Act, the employees relied upon were not shown to be employees of Skema Holdings itself. Their positions were linked to other entities within the group. As a result, the broader impact on employment did not establish that the company before the Court had a viable business capable of rescue.

The manner in which the case was advanced also weighed against the applicants. A series of supplementary affidavits were filed in response to issues raised by the respondents, introducing material that was not contained in the founding papers. Although the Court admitted this material, it emphasised that an applicant must stand or fall by its founding affidavit. The incremental development of the case was relevant in assessing whether a coherent factual basis for rescue existed at the time the application was launched. The Court found that it did not.

Timing was a further consideration. The application was launched after the winding-up proceedings had been argued and judgment reserved. While business rescue may, in principle, be invoked at any stage, the Court emphasised that timing remains relevant in assessing the bona fides of the application. In the context of the evidential shortcomings identified, the timing supported the inference that the application was, at least in part, aimed at delaying the consequences of liquidation.

On the evidence before it, the Court held that the applicants had not established a reasonable prospect of rescuing Skema Holdings. The company’s financial position, the absence of a clearly established operational business, and the reliance on assets and transactions not shown to be within its control, undermined the rescue case. The proposed plan was contingent and insufficiently substantiated.

The application was dismissed, as was the strike-out application, with costs awarded against the applicants.

The judgment underscores the importance of a properly substantiated business rescue application. A business rescue application must demonstrate, on the papers, that the company itself has a viable business and a plan that is capable of implementation. Reliance on group value, anticipated transactions or future cooperation will not meet that standard.

[1] Trustees, Inkwazi Trust v Skema Holdings (Pty) Ltd [2026] ZAKZDHC (13 April 2026).

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When directors fall short of their legal duties, the consequences can be severe, ranging from reputational damage to personal liability. In South Africa, the Companies Act 71 of 2008 (“Companies Act”) provides the framework for directors’ responsibilities, while the King V Report on Corporate Governance for South Africa 2025 (“King V Report”) reinforces the importance of ethical leadership and access to independent, professional advice. Together, these instruments highlight that effective governance begins with a clear understanding of directors’ obligations. Our aim is to provide directors and stakeholders with a concise, accessible resource that underscores both the legal framework and the governance principles shaping boardroom accountability today.

I hope that you find these publications informative and please feel free to contact me for any advice or for further information.

Kind regards,
Dr. Eric Levenstein | Director and Head of Insolvency & Business Rescue

Download the guide here.

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In a restructuring environment often shaped by urgency and commercial pressure, the recent judgment in Tamela Mezzanine Debt Fund I Partnership v KT Wash Detergents Proprietary Limited [1] offers a timely recalibration of first principles. It reminds practitioners, funders and stakeholders alike that business rescue is not an exercise in optimism. It is a structured, creditor-driven process that must be grounded in transparency, fairness and demonstrable commercial logic. Where those elements are absent, even a seemingly viable plan will not survive.

KT Wash entered business rescue pursuant to section 129 of the Companies Act 71 of 2008 (the “Act”). A business rescue plan was subsequently published proposing the sale of the business as a going concern. Despite this, the plan failed to secure the required statutory support, achieving only 50.73% of creditors’ voting interests, instead of the required 75%. That outcome is significant in itself, but what followed is what makes the case particularly noteworthy.

Section 153 allows of the Act provides a mechanism to intervene where a business rescue plan has been rejected. It allows a business rescue practitioner to pursue a revised plan, or an affected person to approach the court to set aside the vote as inappropriate. In doing so, it prevents the automatic collapse of the process following a failed vote and creates space for further engagement where justified.

In this instance, an application to set aside the rejection of the plan was brought by a creditor (unusually so) and not by the business rescue practitioners.

Section 153 of the Act is more commonly invoked by business rescue practitioners seeking to salvage a plan that has failed to achieve sufficient support. Here, however, a creditor, who was also a significant post-commencement financier, sought to overturn the collective decision of the creditor body. The argument advanced was that the vote rejecting the business rescue plan was “inappropriate” and should be set aside. This was premised on the basis that it undermined a viable business rescue plan that depended on their ongoing post-commencement finance. They contended that rejecting the plan was commercially irrational, as it jeopardised the rescue process and would likely result in liquidation.

The court did not accept that proposition.

Pullinger AJ approached the matter from a fundamental starting point. The enquiry was not whether the business rescue plan might have produced a better outcome than liquidation, nor whether the court would have preferred the commercial result proposed. The question was whether creditors had been placed in a position to make an informed decision when exercising their vote. On the facts, they had not.

The court found that the business rescue plan put before creditors, lacked the essential factual foundation required by the Act. It did not adequately explain how the proposed purchase price had been determined, nor did it provide a transparent valuation methodology. It also failed to substantiate the dividend outcomes that creditors could expect under the business rescue plan. In the absence of this information, creditors were effectively being asked to approve a transaction without being able to properly assess its fairness or its comparative benefit. In those circumstances, the court held that their rejection of the plan could not be said to be inappropriate.

The judgment is important for what it does not do as much as for what it does. The court did not attempt to substitute its own commercial judgment for that of the creditors. It did not seek to repair or supplement the deficiencies in the plan. Nor did it treat section 153 of the Act as a mechanism to salvage a proposal that had not met the required evidentiary threshold. Instead, it affirmed that business rescue remains, at its core, a creditor-driven process. Where creditors are not given sufficient information to evaluate a plan, they are entitled to reject it, and the court will be slow to interfere with that decision.

From a commercial perspective, the implications are clear. Business rescue plans must do more than present an attractive outcome. They must be capable of withstanding scrutiny. This requires a level of detail and transparency that enables creditors to interrogate the proposal and make an informed decision. Valuations must be explained, assumptions must be defensible, and the distributional consequences must be clear. Absent this, even a plan that appears viable in principle may fail in practice.

The judgment also reinforces the position of creditors within the restructuring framework provided by Chapter 6 of the Act. Their role is not passive. The statutory voting regime places real power in their hands, and this decision confirms that the courts will respect the exercise of that power, where it is grounded in rational commercial reasoning. At the same time, the case serves as a caution to creditors who seek to take a more interventionist approach. Even a significant funder, as a creditor, cannot rely on the court to override the collective will of creditors where the underlying plan is deficient.

Importantly, the dismissal of the application did not bring the business rescue proceedings to an end. The adjourned meeting is to be reconvened, at which creditors may table a motion requiring the business rescue practitioners to prepare and publish a revised plan. In the event that no such motion is tabled, the business rescue practitioners will be obliged to file a notice terminating the business rescue proceedings. For now, the company remains under supervision, and the success of the process will depend on whether creditors elect to pursue a revised plan and, if so, whether such plan secures the requisite support.

The broader message is clear. Business rescue is, at its core, a creditor-driven process. Approval cannot be assumed, and it cannot be compelled. Where creditors do not support a plan, the process does not bend to accommodate it – it resets. The process now returns to creditors, who will determine whether a revised plan is to be pursued. If a revised plan is proposed and secures the requisite support, the company may yet be restructured. Failing that, the business rescue practitioners will be obliged to terminate the proceedings in accordance with the Act.

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[1] Tamela Mezzanine Debt Fund I Partnership v KT Wash Detergents (Pty) Ltd & Others [2026] 1 All SA 215 (GJ).

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Rising fuel prices are once again dominating economic commentary in South Africa. Business Day reports that the JSE just had its worst month since the 2008 financial crisis, with the all share index having plunged almost 14% in March 2026. While the immediate focus is often on inflation and consumer impact, the implications for business are more complex. This article considers how fuel cost increases are increasingly acting as a trigger for financial distress across key sectors, and why early intervention is critical in preserving value.

South African businesses are well accustomed to operating under sustained pressure. Load-shedding, elevated interest rates, civil unrest, constrained demand and margin compression have become embedded features of the commercial environment. The ongoing crisis in the Middle East has sharply brought into focus the volatility of markets and where the increased price of oil are set to drive inflation to unprecedented levels worldwide.

What distinguishes a sharp increase in fuel prices is not merely the additional cost, it is the role fuel can play as an inflection point: the moment at which existing pressure translates into financial distress for corporates.

Fuel is a uniquely systemic input. It underpins logistics, distribution, production and service delivery across most sectors of the economy. When fuel prices increase, businesses experience an immediate escalation in operating costs, often without the ability to respond in real time. Unlike many other cost drivers, fuel cannot be deferred or meaningfully reduced without operational consequence.

In our current financial environment, this is pivotal. Projected increases come at a time when many businesses are already operating with limited liquidity buffers. Fuel, in this context, does not create distress in isolation. It exposes underlying fragilities and accelerates them.

The impact is most acutely felt in working capital.

Even where fuel is procured through fleet cards, bulk supply arrangements or credit facilities, the cost is incurred immediately and settles over short cycles, typically within 7 to 30 days. The result is that while payment may not be instantaneous, the pressure on cash flow is both rapid and concentrated. At the same time, revenue (particularly in sectors with extended debtor terms) lags behind. This creates a familiar but critical dynamic: costs increase now, while recovery follows later, if at all.

It is at this point that the inflection occurs.

In practice, the early indicators are rarely dramatic, but they are consistent and ever creeping. Businesses begin to stretch creditor payment cycles, rely more heavily on overdrafts and short-term facilities, and experience mounting pressure on stock and inventory funding. Liquidity tightens, often despite turnover remaining stable or only marginally reduced. These developments may not yet constitute formal insolvency, but they are frequently the precursors to it.

Certain sectors are particularly exposed. Transport and logistics businesses experience a direct and immediate escalation in operating costs. Retail and manufacturing absorb the increase through supply chain and distribution channels, often without the ability to pass costs through in real time. Construction and mining operations face higher input costs across plant, fuel and contractor pricing.

Agriculture warrants particular attention. Diesel is a critical input for planting, harvesting and irrigation, meaning that rising fuel costs affect not only on-farm operations but the broader agricultural value chain, including storage, transport and ultimately food pricing. In a sector already exposed to climate variability and input cost volatility, fuel increases can quickly shift marginal operations into distress.

From a restructuring and insolvency perspective, fuel is seldom identified as the primary cause of failure. Formal proceedings typically refer to an inability to pay debts as they fall due, breaches of funding arrangements or sustained creditor pressure. In reality, however, fuel price shocks often act as the catalyst, the event that removes the remaining margin for error in an already constrained business.

Importantly, this is not a question of long-term profitability. Businesses rarely fail because they are unviable over time. They fail because they run out of cash in the short term. That distinction is critical.

The practical implication is that businesses should not wait for distress to crystallise. Those operating in fuel-sensitive sectors should be actively stress-testing cash flow assumptions, reassessing pricing and pass-through mechanisms, and engaging with funders and key creditors at an early stage. In appropriate circumstances, early consideration of restructuring options including negotiating a compromise of debt, a reconfiguration of unwieldy overhead costs, negotiations with landlords for better terms; all feature in what simply needs to be done in a potentially constrained trading environment. When all of this has an impact on the ability to trade on a solvent basis, the timely intervention of a business rescue process, may preserve significantly more value than reactive intervention.

The difference between resilience and distress is often not strategy, but timing.

In the current environment, fuel price increases are accelerating that timeline. Businesses experiencing pressure should engage early to assess liquidity and restructuring options. Once cash flow pressure crystallises into default, the range of available solutions narrows significantly.

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