LML4806 Company Law This Assignment is 100% correct and the given instructions have been followed

LML4806 Company Law This Assignment is 100% correct and the given instructions have been followed. Contents 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. ......................................................... 2 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. .......................................................................................... 3 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. ........................... 5 Bibliography ............................................................................................................ 8 1 LML4806 Company Law Assignment 02 Semester 1 2023 EXAMPLE 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. A company is considered financially distressed if it is likely to be unable to pay its debts as they come due within the next six months or if it is expected to become insolvent within the next six months.2 A company may be placed under business rescue if: (1) it is believed to be unlikely … 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. The philosophy behind business rescue is centred on valuing the ongoing business rather than just the legal entity. The Companies Act 71 of 2008 defines "Business Rescue" as a process to aid the recovery of a financially distressed company.1 Under the Companies Act, a company can reach a compromise with its creditors regardless of whether it is facing financial difficulties, unless it is undergoing business rescue proceedings under Chapter 6 of the Companies Act. 1 A company is considered financially distressed if it is likely to be unable to pay its debts as they come due within the next six months or if it is expected to become insolvent within the next six months. A company may be placed under business 2 rescue if: (1) it is believed to be unlikely to pay all its debts in the next 6 months, or (2) it is believed to be likely to become insolvent within the next 6 months. Section 131(6) of the Act states: "If the company is already undergoing liquidation when an application is submitted under subsection (1), the liquidation proceedings will be temporarily halted until either (a) the court makes a ruling on the application or (b) the business rescue proceedings end if the court grants the requested order."3 1 Companies Act 71 of 2008 2 Cassim, FHI and others, The Law of Business Structures (2 edn, 2021) 29. 3 Companies Act 71 of 2008 131(6) of the Act