MCL5903 ASSIGNMENT 1 (ALL ANSWERS) 2025 (769236) - DUE 6 MAY 2025
(23:00 PM)
COURSE : CORPORATE INSOLVENCY LAW (MCL5903)
ASSIGNMENT NUMBER: : ONE (1) 2025
UNIQUE NUMBER : 769236
DUE DATE : 6 May 2025 (23:00 PM)
___________________________________________________________________
Kindly paraphrase the following model answers to ensure they are free from
plagiarism and maintain a low similarity index, in alignment with academic
honesty and integrity principles. The model answers should be used strictly as
a reference and guideline for rewriting the content in an original and
professional manner.
(a) Understanding the Meaning of ‘Reasonable Prospect’ in Terms of Section
131(1) of the Companies Act 71 of 2008 (10 marks)
When a company is going through financial difficulties, South African law provides a
process called business rescue. This is aimed at helping the company recover,
instead of immediately closing it down. Section 131(1) of the Companies Act 71 of
2008 gives any affected person—like a creditor—the right to ask the court to place a
company under business rescue. However, before the court can agree to this, it must
be satisfied that there is a “reasonable prospect” of rescuing the company.
So, what does “reasonable prospect” mean in this context?
According to the courts, this phrase means that there should be a real and practical
chance that the company can be turned around. It does not mean a guarantee, but it
also cannot be based on vague hopes or guesses. It needs to be based on facts and
evidence. The company or the person making the application should be able to show
the court how the company will be rescued—this includes giving examples of possible
strategies like restructuring its debts, cutting costs, or bringing in investors.
1
, In the case of Oakdene Square Properties (Pty) Ltd v Farm Bothasfontein (Kyalami)
(Pty) Ltd (2013), the court explained that “reasonable prospect” is more than just a
possibility, but also not as strict as a probability. The idea is to avoid unnecessary
liquidations and give companies a fair chance if there is a workable plan in place
(Oakdene Square Properties v Farm Bothasfontein, 2013).
Another case, Panamo Properties (Pty) Ltd v Nel and Others (2015), made it clear that
just wanting to delay creditors or avoid paying debts is not enough. The company must
be able to show a concrete business plan or some kind of financial backing that
makes the rescue possible (Panamo Properties v Nel, 2015).
So, in the case of Aviation Global, if they claim that there is a reasonable prospect of
being rescued, they need to provide real information such as:
A rescue plan or strategy,
Details of possible investors or loans,
Support from key stakeholders like employees or major creditors.
If they cannot show this kind of information, the court is unlikely to grant business
rescue just because the company says it might recover. In short, courts need proof,
not just hope.
2
(23:00 PM)
COURSE : CORPORATE INSOLVENCY LAW (MCL5903)
ASSIGNMENT NUMBER: : ONE (1) 2025
UNIQUE NUMBER : 769236
DUE DATE : 6 May 2025 (23:00 PM)
___________________________________________________________________
Kindly paraphrase the following model answers to ensure they are free from
plagiarism and maintain a low similarity index, in alignment with academic
honesty and integrity principles. The model answers should be used strictly as
a reference and guideline for rewriting the content in an original and
professional manner.
(a) Understanding the Meaning of ‘Reasonable Prospect’ in Terms of Section
131(1) of the Companies Act 71 of 2008 (10 marks)
When a company is going through financial difficulties, South African law provides a
process called business rescue. This is aimed at helping the company recover,
instead of immediately closing it down. Section 131(1) of the Companies Act 71 of
2008 gives any affected person—like a creditor—the right to ask the court to place a
company under business rescue. However, before the court can agree to this, it must
be satisfied that there is a “reasonable prospect” of rescuing the company.
So, what does “reasonable prospect” mean in this context?
According to the courts, this phrase means that there should be a real and practical
chance that the company can be turned around. It does not mean a guarantee, but it
also cannot be based on vague hopes or guesses. It needs to be based on facts and
evidence. The company or the person making the application should be able to show
the court how the company will be rescued—this includes giving examples of possible
strategies like restructuring its debts, cutting costs, or bringing in investors.
1
, In the case of Oakdene Square Properties (Pty) Ltd v Farm Bothasfontein (Kyalami)
(Pty) Ltd (2013), the court explained that “reasonable prospect” is more than just a
possibility, but also not as strict as a probability. The idea is to avoid unnecessary
liquidations and give companies a fair chance if there is a workable plan in place
(Oakdene Square Properties v Farm Bothasfontein, 2013).
Another case, Panamo Properties (Pty) Ltd v Nel and Others (2015), made it clear that
just wanting to delay creditors or avoid paying debts is not enough. The company must
be able to show a concrete business plan or some kind of financial backing that
makes the rescue possible (Panamo Properties v Nel, 2015).
So, in the case of Aviation Global, if they claim that there is a reasonable prospect of
being rescued, they need to provide real information such as:
A rescue plan or strategy,
Details of possible investors or loans,
Support from key stakeholders like employees or major creditors.
If they cannot show this kind of information, the court is unlikely to grant business
rescue just because the company says it might recover. In short, courts need proof,
not just hope.
2
