The supreme court of appeal in Oakdene Square Properties v Farm Bothasfontein (Kyalami) gave some useful guidance about what should be in a business rescue application:
- A party seeking business rescue must show that there is a reasonable prospect of the company being restored to existence on a solvent basis or being restructured to give a better return for creditors or shareholders instead of immediate liquidation.
- Reasonable prospects means there must be a prospect of achieving one of the two goals based on reasonable grounds.
- A reasonable prospect does not mean a probability of rescue and exact details of the plan need not be set out in the application. That is for the business rescue practitioner to do.
- Solvent existence is not only commercial solvency (assets exceeding liabilities) but factual solvency (ability to pay a company’s debts on time).
- Reasonable opposition in good faith by major creditors will be a factor to be considered in deciding whether there is a real prospect of business rescue succeeding.
- Alleged savings on the costs of winding-up does not justify business rescue rather than liquidation.
- The fact that a liquidator has powers to investigate doubtful conduct of directors and executives and suspicious transactions may be a good ground for ordering liquidation rather than rescue.