Application for business rescue proceedings does not terminate the office of provisional liquidators

Supreme Court of Appeal of South Africa: This appeal was filed before a 5-Judge Bench comprising of Seriti, Cachalia, Molemela and Schippers, JJA; Mothle, AJA., against the judgment and order passed by the Gauteng Division of the High Court.

The appellant was a limited liability company. Appellant was facing serious financial problems and was ailing as a result of which the company was placed in business rescue whereby provisional business rescue practitioner was appointment who found that the company should be placed under liquidation. The main issue before the court was whether the appointment and the powers of the duly appointed provisional joint liquidators were suspended in terms of Section 131(6) of the Act which states that until business rescue operation ends the liquidation proceedings was to be suspended. It was submitted that Section 131(6) of the Act does not change the status of the company in liquidation nor does it suspend the court order that placed the company under liquidation in the hands of the Master in terms of Section 141(2)(a)(ii) of the Act.

High Court found that the appointment, office and powers of the provisional liquidators were not suspended as the words used in Section 131(6) was “suspend” which does not mean termination. What is suspended is the process of winding-up and not the legal consequences of a winding-up order. Therefore, this appeal was upheld. [GCC Engineering (Pty) Ltd. v. Lawrence Maroos, Case No. 901 of 2017, decided on 03-12-2018]

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