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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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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Introduction

Liquidation proceedings place companies in an undesirable legal and operational position which they or other affected persons may often seek to escape from. Section 131(1) read with section 131(6) of the 2008 Companies Act (“business rescue applications“) and section 354(1) of the 1973 Companies Act (“setting aside applications“) provide mechanisms whereby affected persons may either interrupt ongoing liquidation proceedings or set aside a liquidation order that has already been granted.

Regrettably, there has been an uptick of affected persons abusing these processes, in bad faith, by launching business rescue applications merely to delay and disrupt ongoing liquidation proceedings or launching setting aside applications where there is no basis for such relief.

The courts have adopted a strict approach when considering the merits of either business rescue applications and setting aside applications. This article discusses the requirements for successful business rescue applications and setting aside applications, and serves as a cautionary tale to affected persons of distressed and/or insolvent companies that business rescue applications and setting aside applications brought in circumstances where a company ought to be wound up may be regarded as an abuse of the provisions of the 2008 and the 1973 Companies Acts.

The abuse of business rescue applications: Globustarr Trading Co LLC v Mayana Properties (Pty) Ltd [2025] 3 All SA 160 (GJ) (“Globustarr”)

In the recent reported judgment of Gloubustarr, the Court found that Mayana Properties Limited’s (“Mayana“) business rescue application, brought in terms of section 131(1) of the 2008 Companies Act, was an abuse, and placed Mayana in final liquidation by order of the court.

Section 131(1) prescribes that:

“Unless a company has adopted a resolution contemplated in section 129, an affected person may apply to a court at any time for an order placing the company under supervision and commencing business rescue proceedings.”

Section 131(6) prescribes that:

“If liquidation proceedings have already been commenced by or against the company at the time an application is made in terms of subsection (1), the application will suspend those liquidation proceedings until –

• the court has adjudicated upon the application; or
• the business rescue proceedings end, if the court makes the order applied for.

Mayana had brought a business rescue application in circumstances where there were ongoing proceedings brought by Globustarr Trading Co LLC (‘Globustarr“) for Mayana’s winding-up. In terms of section 131(6), Mayana’s business rescue application would have ordinarily had the effect of suspending Globustarr’s ongoing liquidation application pending the adjudication of Mayana’s business rescue application.

However, the Court determined Mayana’s business rescue application to be an abuse (and came to this conclusion after considering Mayana’s conduct throughout the proceedings), for the following reasons:

• Mayana filed its answering affidavit to the liquidation application one court day before its (unopposed) hearing date, and without a reason for this late filing placed before the court;
• Unsubstantiated claims of fraud (which form a part of Mayana’s opposition) were pleaded in the answering affidavit;
• Despite being required to do so in terms of the practice directives of the Court, Mayana failed to deliver heads of argument and a practice note, and did not cooperate in the preparation and filing of a joint practice note; and
• There was a delay of at least a month in bringing the business rescue application.

The Court concluded that Mayana’s actions, as outlined above, formed part of a deliberate and concerted attempt to frustrate the ongoing liquidation application. Essentially, the Court held that Mayana’s business rescue was merely launched in pursuit of delaying the adjudication of the application for Mayana’s winding-up.

The Court held that section 131(6) of the 2008 Companies Act (which would have resulted in the suspension of the ongoing liquidation proceedings) did not, and could not, apply to business rescue applications constituting an abuse.

In addition, the Court held that Mayana’s business rescue application was meritless as it failed to set out the requirements for a successful business rescue application such as a detailed business rescue plan, projected funding and the cost of business rescue, financial statements, and where necessary and possible, management accounts, comparative income statements indicating Mayana’s previous profits and shedding light as to its trading going forward and the availability of necessary resources to enable Mayana to meet its operations and expenditure.

Therefore, a business rescue application can constitute an abuse by virtue of the circumstances under which it was launched (i.e., the applicant’s conduct) and/or the merits, wherein the business rescue application lacks merit to such an extent that it constitutes an abuse.

The Court in Globustarr found Mayana’s business rescue application to be an abuse and subsequently granted an order placing Mayana in final liquidation. As a show of its disdain, the Court also awarded punitive costs against the director of Mayana in his personal capacity.

Globustarr serves as a warning to all applicants in business rescue applications not to abuse the business rescue process as the courts will not tolerate such abuse.

Setting aside applications in terms of section 354(1) of the 1973 Companies Act: a relook at the seminal case of Ward and Another v Smit and Others: In re Gurr v Zambia Airways Corporation Ltd 1998 (3) SA 175 (SCA) (“Ward“) 

In Ward, while the word “abuse” is not explicitly used, the Court was critical of the appellant’s (the “Local Liquidators“) case before it to set aside the winding-up order granted in South Africa for Zambia Airways Corporation Limited (“Zambia Airways” or the “Company“).

Zambia Airways was an external company in terms of South African law, that was incorporated in Zambia and had an office in Johannesburg. In 1994, it was voluntarily wound-up in Zambia, with the Local Liquidators appointed as the joint liquidators. Shortly after its liquidation in Zambia, the Company was finally wound-up in South Africa by order of court.

Subsequently, the first respondent in Ward was appointed as the Company’s provisional liquidator (the “Foreign Liquidator“), and had already begun the process of winding-up the Company’s South African estate, had held two meetings of creditors when the Local Liquidators brought an application, among other things, seeking recognition in South Africa, the power to “administer” the Company’s South African estate and setting aside the winding-up of the Company in South Africa.

The Court highlighted that the Local Liquidators had taken approximately five months after the final winding-up order was granted to apply for their recognition in South Africa, and during which time the Foreign Liquidator was appointed and had begun the work of winding-up the Company’s estate in South Africa.

The Court, in Ward, was then tasked to determine whether to set aside the Company’s winding-up in terms of section 354(1) of the 1973 Companies Act, which reads as follows:

“The Court may at any time after the commencement of a winding-up, on the application of any liquidator, creditor or member, and on proof to the satisfaction of the Court that all proceedings in relation to the winding-up ought to be stayed or set aside, make an order staying or setting aside the proceedings or for the continuance of any voluntary winding-up on such terms and conditions as the Court may deem fit“.

The Court in analysing and applying this section seminally held that section 354(1) offered the court “a discretion to set aside a winding-up order both on the basis that it ought not to have been granted at all and on the basis that it falls to be set aside by reason of subsequent events“.

The Court held that in order for such an application to succeed “exceptional circumstances” must exist and outlined that such an applicant in such proceedings must additionally demonstrate:

• how the insolvency came about;
• the company’s full financial position, including its obligations to any creditors;
• whether the company was run with probity; and
• why they did not initially oppose the winding-up or appeal against it.

Other factors considered by the courts in setting aside applications are whether there were any delays in seeking the setting aside as well as any developments in the winding-up.

In applying the above factors for consideration, the Court held that the Local Liquidators had not satisfied section 354(1) of the 1973 Companies Act, due to the fact that a sufficient explanation was not placed before the court as to why the winding-up in South Africa was not opposed, a sufficient explanation was not proffered for the delay in seeking recognition and by the time this recognition was sought, the winding-up of the Company’s estate in South Africa had already commenced with “considerable progress” already made.

Accordingly, the Court in Ward found no acceptable reason or set of exceptional circumstances to set aside the winding-up and the matter was dismissed with costs.

Conclusion

While the abuse in Globustarr was more apparent and deliberate, Ward, almost 30 years earlier, set the precedent that practitioners (as a whole) are not to abuse the statutory and court processes afforded to them and that, whether it is relief under section 131(1) of the 2008 Companies Act or section 354(1) of the 1973 Companies Act, the relief is not merely for the asking.

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Looking ahead to 2026, restructuring of businesses are set to increase as continued pressures brought about by tough trading conditions continue to impact the survival of corporates in South Africa. One of the key indicators of continued financial pressure for corporates into 2026, are some of the delistings on the Johannesburg Stock Exchange (JSE) in 2025 due to filings for business rescue. Both PSV Holdings and Murray & Roberts are set to delist in January 2026 amid financial challenges.

We have also recently seen filings for business rescue in Daybreak Foods (chicken farming), Prax South Africa (oil) and where the South African Post Office, and Mango Airlines continue in their business rescue processes.

After four years of uncertainty, Stefanutti Stocks (construction) has managed to stay out of business rescue after settling with Eskom (R580 million) in regard to work done at the Kusile Power Station, and by reaching new terms with its lenders. The informal restructuring of the entity was run by Metis Advisory after being appointed in 2019, to assist navigating potential financial constraint brought about by a cash flow crunch.

Whether corporates are in need of an informal turnaround or by participating in a formal business rescue process, what is certain is that many struggling companies require independent intervention in order to be able to fend off potential liquidation and closure.

Our current business rescue framework supports the case for robust practical workarounds for companies that are entering positions where they cannot meet obligations to creditors, and where they need a breathing space from creditors to negotiate terms for repayment.

The objective of business rescue is to preserve value, to allow for a moratorium (stay) on claims against the company so that the appointed business rescue practitioner can work towards the rehabilitation or preservation of the company as a going concern.

What is important for struggling companies to understand is that the option of a formal business rescue process allows these companies to reset, take a hard look as to the manner in which they trade, and to get independent advice from experts in turnarounds and restructuring, namely from the restructuring advisor/business rescue practitioner, so as to allow it to continue to trade and participate in the South African economy. All rescue efforts are focused on averting a final closure of the entity in a liquidation scenario.

The current business rescue regime that was introduced in Chapter 6 of the 2008 Companies Act in 2011, is company (debtor) centric and rescue-driven. The primary objective of business rescue is the ability to compromise historical debt, renegotiate prejudicial contracts, reconfigure the company’s workforce and ultimately work together with all stakeholders to develop and implement a business rescue plan that enables the company to continue operating as a going concern. Only where this is not possible, does the process default to a secondary objective, to provide creditors with a better return than they would receive in an immediate liquidation. This shift in focus demonstrates a deliberate legislative intention to preserve value, safeguard jobs, protect investment, and maintain economic participation wherever possible. The objective being to provide a distressed company with the opportunity for a “fresh start”, and where the company is provided with a runway to trade its way out of distress, through a restructuring process and where the company would have the opportunity to trade out to a position of solvency into the future.

In practice, however, business rescue is underutilised. This is because, business rescue is often considered very late in the distressed curve and where directors fear handing over the reins to an independent person, namely the business rescue practitioner, and where they would lose control of the company and the restructuring process. Directors are also reluctant to admit having traded the company into a period of financial difficulty and which behaviour would reflect on poor leadership, and often is reflective of a failure to timeously take the necessary steps to prevent financial collapse.

In reality, business rescue is a highly effective restructuring tool, but its success depends on being utilised at the right time. It provides companies with a mechanism to remain economically active while offering potential investors opportunities to acquire assets or equity, and provide creditors with the prospect of a better return and the unlocking of value, compared to what would result in a liquidation.

In April 2025, a significant development in insolvency and business rescue practice came about with the introduction of the Johannesburg High Court’s Pilot Project, namely the formation of a Dedicated Insolvency Court, which established both an Insolvency Motion Court and an Insolvency Trial Court. Alongside sequestration and liquidation proceedings, business rescue matters are now also handled by this specialised court. The new Insolvency Court, is staffed with judges trained in insolvency law, which promises more equitable and informed decisions. Equally important was that prior to the introduction of the new Insolvency Court, there were significant delays in court hearings. Insolvency and business rescue matters are inherently urgent. Under the Insolvency Court, hearings follow a four-week cycle from date of enrolment, a welcome improvement, given the time-sensitive nature of business rescue and the critical importance of swift action to protect value and preserve companies who find themselves in financial distress. The new Insolvency Court in Johannesburg adds a refreshing and very exciting dimension to insolvency practice, for all of us involved in the insolvency and business rescue. We are hoping that in 2026, we are going to see the roll out of other insolvency courts in the other divisions of the High Court country -wide.

Business rescue is important for South Africa’s economy in that it allows for –

• Job creation and preservation – in many business rescue matters we see the preservation of jobs and employment, particularly when we are able to rescue the company and where it does not collapse into liquidation, causing the ultimate demise/end of the company’s life, with the consequent loss of jobs and retrenchments. By offering continued employment to a large part of the workforce, assists in keeping unemployment figures down, and where companies can continue to trade, albeit with a reduced number of employees, cutting overheads and the cost of running the business.
• Distressed companies having access to finance – often companies go into rescue because they are financially distressed – they cannot pay their debts in the ordinary course of business. By filing for business rescue, these companies have the opportunity for distressed funding lines in the form of “post -commencement finance” – PCF, and where anyone providing such PCF would be preferent in a business recue. This promotes new capital and would enable a company to be restructured. PCF provides a funding lifeline and where the company can buy some time (breathing space) to have its restructuring BR plan approved by creditors, have the plan implemented and where the company can exit from rescue on a solvent basis, enabling the company to continue to trade on into the future.  This can only be a positive for the company, its stakeholders (particularly for its suppliers of goods and services) and to the SA economy as a whole.
• Potential for increased investment in distressed companies – over the last decade we have seen a marked increase in the opportunity for cash flush investors to acquire assets or distressed companies out of business rescue. We have seen multiple examples of this and where third party offerors have concluded transactions at deep discounts and where these acquirors have walked away with value assets and companies. So the opportunities available to bed down these distressed M&A transactions have increased. These transactions have occurred in the mining/resource space, and in retail and manufacturing, and where we have seen consolidation of sectors as a result of these transactions happening out of rescue.
• Supports entrepreneurship – fresh start principles of restructuring – the chance for a company to be rescued and have a second chance (a fresh start) is of course fundamental to restructuring models in most jurisdictions across the globe, and we have certainly seen this with some of the successful rescues that have taken place in South Africa over the last few years.

It is important that a country like South Africa has viable and effective restructuring mechanisms whether it be on an informal basis (as seen in Stefanutti Stocks) or where a formal intervention such as business rescue is required.

Successful rescue regimes promote investment, bolster the economy and where jobs and viable businesses are preserved through the rescue process. Companies which were on the verge of collapse, are restructured and brought back from the cliff edge of disaster, and where they are placed back into local economies for the benefit of all stakeholders.  The important challenge is for South Africa to ensure that it continues to have a reliable and workable framework for turnarounds of distressed companies. This would enable positive outcomes for SA Inc, and where skilled practitioners are able to implement and supervise these opportunities for rescue. If creditors and banks are confident in the rescue regime applicable, they will continue to support the company after its exit from the rescue process.

In 2026, it is very important that practitioners continue to highlight successful rescues and restructuring outcomes and where they promote the benefits of the process. Examples of companies having been successfully restructured or rescued, and where a better return to creditors has been achieved as to what would have resulted in a liquidation, must be shared with all stakeholders and the South African public as often as possible. This promotes confidence in the local economy and where creditors know that they will be able to maximize returns in distressed situations.  Restructuring and formal business rescue processes remains active, and we are seeing more and more boards of directors starting to consider the urgent need for a formal restructuring alternative at a much earlier stage in the distressed curve, and where such intervention averts the potential for significant destruction in value brought about by liquidation.

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Following the great success of the pilot dedicated Insolvency Court in Johannesburg, and after deliberations with specialist insolvency practitioners, the Gauteng Division of the High Court has resolved to pilot a dedicated Insolvency Court in the Pretoria High Court, with effect from Term 1 of 2026. The initiative reflects a judicial recognition that insolvency matters require specialist oversight and structured case-flow management to reduce delay, congestion, and procedural uncertainty.

In practical terms, the directive introduces immediate and material changes for insolvency practitioners. Insolvency matters will no longer be accommodated on the general motion or opposed motion rolls and will instead be channelled through a dedicated Insolvency Motion Court or, where appropriate, a dedicated Insolvency Trial Court. Matters will ordinarily be heard on a fixed 7 week cycle from enrolment to hearing (excluding court recess periods). Urgency will be the exception rather than the rule, and will not justify bypassing the insolvency roll. Practitioners are required to correctly classify matters at the issue and enrolment stages, failing which matters risk removal from the roll or adverse cost consequences. More active judicial case management should also be anticipated in complex matters.

The Dedicated Insolvency Court comprises two components, a dedicated Insolvency Motion Court (“IMC“) and a dedicated Insolvency Trial Court (“ITC“). All insolvency related matters, whether opposed, unopposed, or interlocutory, are intended to be heard in this specialised forum. These include sequestration and liquidation applications, business rescue proceedings, rehabilitation proceedings, reviews and interlocutory disputes arising from insolvency proceedings.

A defining feature of the system is the 7 week rolling cycle from enrolment to hearing. Matters will ordinarily be heard in the seventh week after the week in which the request for enrolment is uploaded, excluding recess periods.

The first hearings under this framework will take place during the week of 19 January 2026, being the first week of Term 1. From that week, all insolvency matters already enrolled on the general motion roll or opposed motion roll will be automatically transferred to the dedicated Insolvency Court roll, without any steps being required by practitioners. The directive expressly discourages attempts to bypass the insolvency court by enrolling matters on alternative rolls.

Urgency will be tightly regulated. Only in exceptional circumstances may a matter be heard earlier than the applicable cycle, and practitioners must still satisfy the requirements of the general urgent court. Urgent relief will ordinarily be confined to interim orders or rules nisi, and attempts to manufacture urgency may attract adverse cost consequences.

Where disputes of fact or evidentiary complexity render motion proceedings inappropriate, the court may issue case management directions, including referrals to oral evidence or trial under the supervision of the ITC.

The introduction of the dedicated Insolvency Court in Pretoria is expected to bring greater predictability and efficiency to insolvency proceedings. Clients can anticipate more structured timelines and focused judicial oversight, with matters being managed within a specialist forum designed to reduce delay and improve outcomes.

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Quite understandably, the word ‘liquidation’ can send shivers down the spine, and cause a company director to run for cover. The negative connotation makes sense: liquidation is almost always associated with corporate failure, empty bank accounts, and the misery of commercial dreams lying in tatters. It conjures images of a fire sale of assets, irate creditors, desperate staff, and threats of legal recourse.

But this is not necessarily the case. Many company directors, legal advisors and company secretaries are not fully aware of just how valuable and useful a tool a voluntary liquidation can be. It is a process that can be used not only to bring an end to a non-performing and terminal company, but also to effect corporate ‘clean-ups’ of dormant and unneeded subsidiary companies that continue a silent and unnecessary existence within a corporate group.

For those directors that are put off from liquidating because of the fear of costs and the public shame of liquidation proceedings being called in a Court, a voluntary liquidation can be cost effective, and can avoid lengthy Court proceedings. Legal advisors and company secretaries can identity subsidiary companies that are no longer needed, and use voluntary liquidations to conduct a clean-up of the corporate group, and sterilise the corporate organogram.

The benefits are obvious. The ongoing costs of maintaining the existence of an unwanted company, can be avoided: costs associated with the preparation and filing of annual returns, the conducting of audits, and the drafting of annual financial statements, would fall by the wayside. The valuable management time, usually dedicated to collating documents, attending meetings and finalising those processes, can be better spent managing the business, and conducting income-generating activities. Over the long run, insurance and legal fees could be reduced, whilst eliminating an unwanted / dormant company, usually eliminates any legal risk and obligation that arises from their continued existence.

Simply put, there is no reason, in circumstances where voluntary liquidations provide a cheap and efficient means of ending the existence of an unwanted or dormant company, to continue their existence. Similarly, there is no reason for directors, legal advisors, company secretaries, and tax departments, to continue incurring unnecessary costs, and unjustifiably allocating the valuable resources of time and attention.

There seems to be a belief that voluntary liquidations can only be used where the company in question has no debts, or is solvent. This is not the case. Whilst it is true that the voluntary liquidation of a solvent company (i.e. one with no debts) allows for slightly greater degree of ease, the reality is that an insolvent company, or even a company with debts, can also be liquidated voluntarily. A company with property, debts to SARS and employees, can also be voluntarily liquidated, although obtaining prior legal guidance is advisable.

Regardless, a voluntary liquidation avoids Court. Instead, the process commences with the passing of shareholder resolutions, and additional documents. Depending on the type of voluntary liquidation, the company’s auditors may need to provide a certificate, or the directors need to file a statement of affairs, or the Master’s Office may dispense with the need to put up security for the company’s debts. Again, depending on the type of voluntary liquidation, it may be possible not only to appoint a liquidator of choice and give the liquidator powers and authorities (to conduct the process), but there is the added benefit of being able to set a pre-agreed fee with the liquidator, so that costs can be managed, and are predictable from the outset of the process.

As in most processes governed by statute, there are certain technicalities and procedures involved, some of which are not always evident and clear from the statutory provisions. Directors, the legal advisor or the company secretary would likely prefer to lean on the expertise and experience of external legal advisors, to ensure that the entire procedure is conducted without any hiccups, and to provide the safeguard and comfort of finalisation. Once again, there is no reason why the attorney’s fees and costs cannot also be agreed from the outset of the process, thus lowering the prospects of any unpleasant cost surprises.

There is no need to continue to avoid correspondence from SARS, and communications from accountants and insurers, or to lament the allocation of precious time to an unwanted company. There is no need to have to report on a host of companies that have long-since ended their usefulness and exhausted their purpose. If, for whatever reason, the lifecycle of a company has reached its sunset, then a voluntary liquidation can be used to bring things to an end in a cost-effective and efficient manner.

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An SME that permits its customers and suppliers to trade with it on credit terms, does so in the hope that deferred payment will result in more business. There is a dark side lurking to this arrangement, which goes beyond a mere payment delay or default. When a customer or supplier with a large amount owed on account to the SME suddenly falls into liquidation, various risks immediately arise, and it is useful to outline a few issues that are common to most liquidation processes.

A liquidation generally results in the cessation of business and trading operations. The Master’s Office appoints a liquidator, who takes control of the company’s assets and property. This will include any cash and investments, the securing of any immovable property, and the taking into possession of trading stock and movable property like equipment and furniture, as well as the debtors’ book. A liquidator is responsible to secure all assets (for the benefit of creditors, at a later stage), and must take the necessary steps to recover any assets (such as property or payment) from third parties.

A liquidator must also take steps to identify and assess the creditors of the liquidated company. Often, the liquidated company’s books and records are incomplete and unreliable, so it is not uncommon for a liquidator to have no knowledge of some of the creditors (in which case they will received no formal notifications and correspondence pertaining to the liquidation process). An SME creditor must be aware of developments in the process, be recorded as a creditor, and liaise with the liquidator through the appropriate channels.

Creditors’ meetings are convened, and at those meetings claims can be lodged, resolutions determining the liquidator’s authority and powers can be considered and voted on, and further directions can be given by the creditors.

A liquidator might also convene a formal insolvency enquiry, where the directors of the liquidated company are usually required to testify as to the business, assets and affairs of the company, and the reasons for its demise. An enquiry can also involve other third parties being called to testify as to the amounts they owe to the liquidated company, or the payments that they received prior to its liquidation. It is common, following an insolvency enquiry, for the liquidator to institute legal proceedings against the liquidated company’s directors (for damages for reckless or negligent trading), or against third parties for recovery of assets, even if those third parties received payment in what appeared to be legitimate and standard commercial practice.

Directors of an SME creditor may be called to provide information / documentation or testify (under oath, and usually through questioning by an attorney or advocate) at an insolvency enquiry, and may receive a demand or subpoena to do so – this is a red flag for such directors, and if legal representation has not already been engaged, this would certainly be the time to do so, in order to avoid or limit subsequent liability or loss.

The SME creditor’s formal claim to participate in any liquidation dividend, needs to be prepared in accordance with statutory requirements, correctly and timeously lodged at the appropriate Master’s Office, and advanced / proved at a meeting of creditors. Only proved creditors can vote at meetings, and only proved creditors can share in any liquidation dividends in the future. It is not thus uncommon for other creditors to oppose attempts to prove claims: this will largely be a legal argument, premised on the prevailing facts and the legal treatment of different types of claims. Whether or not a claim should be proved will include an assessment of whether or not the SME creditor is likely to participate in a liquidation dividend – if not, a proved SME creditor is at danger of suffering the dual blow of not being paid a portion of its debt, and being responsible to contribute to the costs of administering the liquidated company.

Whether any liquidation dividend will ever be paid to a proved SME creditor depends on a number of factors, including the value of the assets that have been recovered and which are available for distribution, the extent of security held by creditors (such as a mortgage bond, notarial bond, reservation of ownership, etc), the amounts owed to SARS and employees, and the costs of the liquidation process. Concurrent creditors (those not secured and those given preference in terms of statute) are only paid if there are assets available after payment to secured and preferent creditors. This can be a months-long or event years-long process.

If an SME’s customer or supplier goes into liquidation, it is immediately time for the SME to engage legal representation. The liquidation process is complicated and confusing, is fraught with procedure and technicalities, and is often regarded as commercially unfair. It is a process that can be intrusive, and time-consuming, and a misstep can not only result in not receiving a liquidation dividend, but also being subject to legal proceedings to recover payment which the SME creditor believed it fairly and rightfully received. Strategic, commercial and financial decisions need to be made from the outset, and advanced knowledge of the principles, technicalities, and consequences of the process, is crucial.

An SME creditor that attempts to navigate this process without adequate knowledge and assistance, can inadvertently suffer crippling and costly unintended consequences. As is often the case, not incurring the costs of legal assistance, can quickly become far more costly.

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On 1 July 2025 the East African Community Competition Authority (“EACCA“) published a notice (“Notice“) announcing that the EACCA will commence receiving and reviewing merger notifications for its approval with effect from 1 November 2025.

The EACCA was established in terms of the 2006 East African Community Competition Act and is the competition regulatory authority of the East African Community (“EAC“), a regional economic bloc comprising eight “Partner States”, namely Burundi, the Democratic Republic of the Congo, Kenya, Rwanda, Somalia, South Sudan, Uganda and Tanzania. The EACCA has exclusive jurisdiction on all competition and consumer protection matters (and all economic activities and sectors) having a cross border effect within the EAC. It is based in Arusha, Tanzania.

Definition of a merger in the EAC Competition Regime

A merger is widely defined as “the acquisition of shares, business or other assets whether inside or outside the community resulting in the change of control of a business, part of a business or an asset of a business in the community in any manner and includes a take over”.

When a merger is notifiable to the EACCA

A merger (as defined) will be notifiable to the EACCA if –

(a) it has a “cross border effect” i.e. it involves undertakings with operations in two or more EAC Partner States; and

(b) the combined turnover or assets (whichever is higher) of the merging undertakings in the EAC, equals or exceeds USD 35 million; and

(c) at least two undertakings to the merger have a combined turnover or asset value of USD 20 million in the EAC.

However, if each of the parties to a merger achieves at least two thirds of its aggregate turnover or asset value in the same Partner State of the EAC, the merger will not be notifiable to the EACCA but may be notifiable to a national competition or other regulator having jurisdiction.

Notification to the EACCA is mandatory and a failure to notify and obtain approval results in the merger not coming into effect. Penalties of up to 10% of an undertaking’s annual turnover within the EAC in the preceding financial year may be imposed for a failure to notify or for implementing a notifiable merger without prior approval.

Merger notifications must be made in a prescribed form and e-notifications will be allowed. The EACCA is obliged to decide mergers within 120 days (which the EACCA interprets as 120 working days) failing which the merger may be implemented without approval.

The Notice states that –

(a) merger proceedings for mergers with a cross-border effect within the EAC, that have commenced or are pending before a national competition regulator or any other relevant authority in a EAC Partner State before the date of publication of the Notice (being 1 July 2025), will be finalised by that regulator and/or authority. It is unclear whether mergers notified to a national regulator or authority during the period 1 July 2025 to 31 October 2025 will also (if notifiable) have to be notified to the EACCA for approval if it is not finalised by the national regulator and/or authority before 1 November 2025;

(b) mergers with a cross-border effect within the EAC that have been notified to the EACCA are not required to be notified to the national competition authorities of EAC Partner States. The EACCA is accordingly intended to function as a “one stop shop” for competition merger approvals in the EAC.

EACCA merger filing fees

The Notice sets out the merger filing fees payable to the EACCA. Mergers in which the aggregate turnover or asset value (whichever is higher) is –

(a) USD 35 million to USD 50 million will have a fee of USD 45 000;

(b) above USD 50 million to USD 100 million will have a fee of USD 70 000; and

(c) above USD 100 million will have a fee of USD 100 000.

Overlap with COMESA Competition Commission

Six of the eight countries within the EAC (other than South Sudan and Tanzania) are also members of the Common Market for Eastern and Southern Africa (“COMESA“) which has its own regional competition regulator, the COMESA Competition Commission (“CCC“), whose merger control regime has been operational since 2014.

On 10 June 2025, the CCC and EACCA signed a Memorandum of Understanding which however only provides a general framework for cooperation between them for example facilitating information sharing, technical assistance, capacity building and coordinating enforcement activities. No detail is provided on how the CCC and EACCA will deal with mergers that are notifiable to both of them.

What the EACCA’s notification regime means for Merging Parties

The commencement of the EACCA’s suspensory merger control regime from 1 November 2025 will require parties planning mergers within the EAC to consider (and if required comply with) the EAC’s merger control requirements. Whilst the EACCA envisions itself as being a “one stop shop” for merger control, it is not yet clear to what extent the CCC and national competition regulators of EAC Partner States will (or are legally competent under their own merger control regimes to) relinquish their jurisdiction over mergers to the EACCA. It is helpful that –

(a) the EACCA has signed memoranda of understanding with the Tanzanian, Rwandan and Kenyan competition authorities which provide a framework for dealing with overlaps;

(b) South Sudan and Somalia do not yet have a binding competition law in place.

With the fast approaching 1 November 2025 EACCA commencement date, the risk however exists that a merger could be notifiable to both the EACCA and the CCC as well as to national regulators. This would result in the duplication of fees and processes and undermine the “one stop shop” nature of both the EACCA and the CCC. Merging parties will accordingly have to –

(a) prepare for potential multiple notifications to the EACCA, CCC and national authorities. This will add to the costs and may affect transaction closing timetables; and

(b) consider whether work-arounds and “carve outs” can feasibly be incorporated into the transaction to ring fence affected undertakings until approval for the merger is obtained.

Contact the Werksmans Competition practice area to assist you in navigating the new EACCA merger control regime and for advice on merger filings in South Africa and across the African continent.

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