LML4806 ASSIGNMENT 2 OF SEMESTER 1
2023
UNIQUE CODE: 816869
, Assignment 02
QUESTION:
Mahlangu Roadworks (Pty) Ltd was awarded a contract by a provincial government to
upgrade and to repair a number of secondary roads in the province. The company
completed the work months ago but has still not received payment from the provincial
government. As a result, the company is struggling to pay its employees and has not paid
other creditors when payment was due. It has also exhausted its credit facilities at the
bank. The company’s managing director, Mr Mahlangu, believes that the board should
immediately adopt a resolution to place the company under business rescue because
some creditors have threatened to apply for liquidation of the company if they do not get
paid. He fears that once an application for a liquidation order has been filed with the
court, and certainly if a liquidation order is issued by the court, business rescue will no
longer be possible. Mr Mahlangu is also worried because the company leases most of the
heavy-duty equipment it uses and although the company has managed to keep up the
payments for this equipment up to now, he is not sure for how much longer this will be
possible. If the company misses any payment the lessors may cancel the lease and remove
their equipment.
Advise Mr Mahlangu on the following aspects:
1.1 With reference to the Companies Act 71 of 2008 and relevant case law, discuss
whether the board of directors may commence business rescue proceedings
(assuming that Mahlangu Roadworks (Pty) Ltd is financially distressed) after
liquidation proceedings have been initiated against Mahlangu Roadworks (Pty) Ltd.
Discuss further whether Mahlangu Roadworks (Pty) Ltd may be placed under
business rescue by any other party after a liquidation application has already been
instituted against the company as well as after a liquidation order has been issued
against the company.
1.2 Assuming that Mahlangu Roadworks (Pty) Ltd is financially distressed, discuss
whether, instead of going down the route of business rescue, the company may
enter into a compromise arrangement with its creditors and thereby prevent
dissolution of the company if a liquidation order is issued, and what such a
procedure would entail.
1.3 Assuming Mahlangu Roadworks (Pty) Ltd is placed under business rescue, explain
to what extent the business rescue practitioner may prevent the lessors of the
heavy-duty equipment from cancelling the lease contracts and re-possessing the
heavy-duty equipment if the company misses any payment.
1
2023
UNIQUE CODE: 816869
, Assignment 02
QUESTION:
Mahlangu Roadworks (Pty) Ltd was awarded a contract by a provincial government to
upgrade and to repair a number of secondary roads in the province. The company
completed the work months ago but has still not received payment from the provincial
government. As a result, the company is struggling to pay its employees and has not paid
other creditors when payment was due. It has also exhausted its credit facilities at the
bank. The company’s managing director, Mr Mahlangu, believes that the board should
immediately adopt a resolution to place the company under business rescue because
some creditors have threatened to apply for liquidation of the company if they do not get
paid. He fears that once an application for a liquidation order has been filed with the
court, and certainly if a liquidation order is issued by the court, business rescue will no
longer be possible. Mr Mahlangu is also worried because the company leases most of the
heavy-duty equipment it uses and although the company has managed to keep up the
payments for this equipment up to now, he is not sure for how much longer this will be
possible. If the company misses any payment the lessors may cancel the lease and remove
their equipment.
Advise Mr Mahlangu on the following aspects:
1.1 With reference to the Companies Act 71 of 2008 and relevant case law, discuss
whether the board of directors may commence business rescue proceedings
(assuming that Mahlangu Roadworks (Pty) Ltd is financially distressed) after
liquidation proceedings have been initiated against Mahlangu Roadworks (Pty) Ltd.
Discuss further whether Mahlangu Roadworks (Pty) Ltd may be placed under
business rescue by any other party after a liquidation application has already been
instituted against the company as well as after a liquidation order has been issued
against the company.
1.2 Assuming that Mahlangu Roadworks (Pty) Ltd is financially distressed, discuss
whether, instead of going down the route of business rescue, the company may
enter into a compromise arrangement with its creditors and thereby prevent
dissolution of the company if a liquidation order is issued, and what such a
procedure would entail.
1.3 Assuming Mahlangu Roadworks (Pty) Ltd is placed under business rescue, explain
to what extent the business rescue practitioner may prevent the lessors of the
heavy-duty equipment from cancelling the lease contracts and re-possessing the
heavy-duty equipment if the company misses any payment.
1
