, LML4806 ASSIGNMENT 2 SEMESTER 2 2026
DUE DATE: 10 SEPTEMBER 2026
Question 1
1.1 Criteria for Financial Distress and Grounds for Voluntary Business Rescue under the
Companies Act 71 of 2008
Viljoen Blankets Ltd appears to satisfy the requirements for voluntary business rescue under
the Companies Act 71 of 2008 because the facts indicate that the company is financially
distressed while there remains a reasonable prospect of rescuing it. Section 128(1)(f)
provides that a company is financially distressed if it appears reasonably unlikely that it will
be able to pay all of its debts as they become due and payable within the immediately
ensuing six months, or if it appears reasonably likely that the company will become
insolvent within the immediately ensuing six months.1 The assessment therefore considers
both the company's ability to meet its financial obligations and its likely financial position
over the short term. In the present case, Viljoen Blankets Ltd owes creditors R100 million, is
experiencing serious cash flow problems, and is already facing legal proceedings by Touws
Bank Ltd for the recovery of a secured loan of R75 million. These facts indicate that the
company falls within the statutory definition of financial distress.2
Section 129(1) of the Companies Act empowers the board of directors to voluntarily place a
company under business rescue by adopting a board resolution if it has reasonable grounds
to believe that the company is financially distressed and that there appears to be a
reasonable prospect of rescuing the company.3 The purpose of business rescue is to
facilitate the rehabilitation of a financially distressed company through temporary
supervision of its affairs, a temporary moratorium on creditors' legal claims, and the
1
Companies Act 71 of 2008 s 128(1)(f).
2
Companies Act 71 of 2008 s 128(1)(f).
3
Companies Act 71 of 2008 s 129(1).
DUE DATE: 10 SEPTEMBER 2026
Question 1
1.1 Criteria for Financial Distress and Grounds for Voluntary Business Rescue under the
Companies Act 71 of 2008
Viljoen Blankets Ltd appears to satisfy the requirements for voluntary business rescue under
the Companies Act 71 of 2008 because the facts indicate that the company is financially
distressed while there remains a reasonable prospect of rescuing it. Section 128(1)(f)
provides that a company is financially distressed if it appears reasonably unlikely that it will
be able to pay all of its debts as they become due and payable within the immediately
ensuing six months, or if it appears reasonably likely that the company will become
insolvent within the immediately ensuing six months.1 The assessment therefore considers
both the company's ability to meet its financial obligations and its likely financial position
over the short term. In the present case, Viljoen Blankets Ltd owes creditors R100 million, is
experiencing serious cash flow problems, and is already facing legal proceedings by Touws
Bank Ltd for the recovery of a secured loan of R75 million. These facts indicate that the
company falls within the statutory definition of financial distress.2
Section 129(1) of the Companies Act empowers the board of directors to voluntarily place a
company under business rescue by adopting a board resolution if it has reasonable grounds
to believe that the company is financially distressed and that there appears to be a
reasonable prospect of rescuing the company.3 The purpose of business rescue is to
facilitate the rehabilitation of a financially distressed company through temporary
supervision of its affairs, a temporary moratorium on creditors' legal claims, and the
1
Companies Act 71 of 2008 s 128(1)(f).
2
Companies Act 71 of 2008 s 128(1)(f).
3
Companies Act 71 of 2008 s 129(1).
