A court can issue an order placing a company in business rescue if it is shown that the company has reasonable prospects of being restored to a continued solvent existence or of achieving a better return for creditors and shareholders than would result from immediate liquidation. The supreme court of appeal made this finding in Oakdene Square Properties v Farm Bothasfontein (Kyalami).
A business rescue court application can therefore demonstrate the reasonable prospect of:
- producing a plan that restructures the company’s affairs, business, property, debt and other liabilities, and equity in a manner that maximises the likelihood of the company continuing in existence on a solvent basis;
- if the company cannot be restructured to continue in existence on a solvent basis, facilitating a better return for creditors or shareholders than would result from immediate liquidation; or
- developing a business rescue plan aimed at achieving rehabilitation to solvency and, if not achieved, a better outcome on dissolution.
Any one of those three prospects can be established as reasonable grounds for granting a business rescue order.