MCL5903
ASSIGNMENT 1 2025
UNIQUE NO. 769236
DUE DATE: 6 MAY 2025
, MCL5903
Assignment 1 2025
Unique Number: 769236
Due Date: 6 May 2025
Corporate Insolvency Law
(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.
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
ASSIGNMENT 1 2025
UNIQUE NO. 769236
DUE DATE: 6 MAY 2025
, MCL5903
Assignment 1 2025
Unique Number: 769236
Due Date: 6 May 2025
Corporate Insolvency Law
(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.
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
