COURSE: LML4806

ASSIGNMENT 2:  SEMESTER 1

DUE DATE: 18 April 2023
Albertine Mkhosi
Student number: 49685627

ACADEMIC HONESTY DECLARATION

Declaration: .............................................
 I understand what academic dishonesty entails and am aware of UNISA’s
policies in this regard.
 I declare that this assignment is my own, original work. Where I have used
someone else’s work, I have indicated this by using the prescribed style of
referencing. Every contribution to, and quotation in, this assignment from the
work or works of other people has been referenced according to this style.
 I have not allowed, and will not allow, anyone to copy my work with the
intention of passing it off as his or her own work.
 I did not make use of another student’s work and submit it as my own.

NAME: .............Albertine Mkhosi........................................................

SIGNATURE: ....................................................................................
STUDENT NUMBER: ...49685627...................................................
MODULE CODE: ..LML 4806.............................................................
DATE: .......18 April 2023................................................................
2 ASSIGNMENT 02
1.1 Can the board of directors commence business rescue proceedings after
liquidation proceedings have been initiated.
The board of directors can begin a voluntarily business rescue proceedings by
means of a resolution. Provided no liquidation proceedings have already been
initiated by or against the company, section 129 (2) of the Companies Act 71.
The definition of initiated is the basis of the interpretation; in Tjeka Training Matters
(Pty) Ltd v KPPM Construction (Pty) Ltd, it was decided that the liquidation should
not only be applied but also served; for it fall withing the definition of “initiated.
In the Mouton v Park 2000 Development 11 (Pty) Ltd and others, the opposite was
decided in terms of the definition of initiated; to include when a resolution or decision
by a creditor to launch liquidation proceedings of a company is adopted and not
when the application is filled with the court. The level of knowledge that a board
possesses at the time when a resolution is adopted is highly relevant and will be
taken into consideration by the courts in pursuance of a just and equitable outcome.
In line with Tjeka Training decision and the facts at hand; we would advise Mr.
Mahlangu to apply as he has not been served.

Can any other party place Mahlangu Roadworks (MR) under business rescue
after liquidation application has already been instituted
In terms of section 131(1), any affected person may apply to a court at any time for
an order to place the company under supervision and to commence business rescue
proceedings. The liquidation proceedings will automatically be suspended until the
court has adjudicated on the application in terms of section 131(6). 1

ABSA Bank Ltd v JVL Beleggings (Pty) Ltd, liquidation proceedings have already
“commenced" was defined as an application had been filed, but not yet considered"
The above case defined “commenced” as a provisional or final liquidation order been
granted.

Can any other party place MR under liquidation after liquidation order has
been issued
1
if liquidation proceedings have already been commenced by or against the company at the time an application is made in
terms of subsection (1), the application will suspend those liquidation proceedings until (a) the court has adjudicated upon the
application; or (b) the business rescue proceedings end, if the court makes the order applied for.

2
In the Van Staden v Angel Ozone Products CC (In Liquidation), the final liquidation
order had been obtained; however, the liquidation proceedings were not at the
winding up or deregistration phase. In this case it was held that liquidation process
should not be equated with winding up proceedings. That the liquidation proceedings
come to an end once a final liquidation order had been granted and winding up is
concluded once the Master approves a final liquidation and distribution account.
Legodi J concluded that the winding up proceedings should be seen as a
continuation of the liquidation proceedings. Based on the above judgment the court
should be able to convert the liquidation and winding up proceedings to business
rescue as the court has the authority to appoint an interim business rescue
practitioner to take control of the company in line with section 132(1) (c).
In Richter v Bloempro CC, it was decided that an application for business rescue will
serve to suspend liquidation proceeding even after a final liquidation order had
already been granted and the company placed in the hands of a liquidator.

1.2 A ‘compromise’ is an agreement between a company and its creditors or a class

of creditors that terminates a dispute over the rights of the parties which are to
be compromised or their enforcement.
The board of a MR or liquidator may propose an arrangement to its creditors.
 Obtain every creditors detail in terms of name and address where feasible.
 Deliver a copy of the proposal with the notice of meeting to all creditors for
consideration including the commission.
 The proposal must contain reasonable information for effective decision
making by creditors as per date of the proposal. It therefore has three parts:
Background –
 A complete list of all the material assets of the company as of the date of
the proposal and indicate which assets are held as security by creditors.
 Complete list of the creditors, clearly demonstrate which one are secured
and confirm which creditors has proved their claims. Including probable
dividend that will be received in specific classes and any proposal made
informally by a creditor of the company.
Proposals
 The nature and the duration of any proposed debt moratorium;

3
  The extent to which the company is to be released from the payment of its
debts, and converted to equity in the company;
 The treatment of contracts and the ongoing role of the company;
 The property of the company that is proposed to be available to pay the
claims of creditors;
 The order of preference to be applied to pay the creditors if the proposal is
adopted; and the benefits of adopting the proposal vs allowing for
liquidation process.
Assumptions and conditions
 A statement of the conditions that must be met, for the proposal to come
into operation and to be fully implemented.
 The effect of the plan on the employees.
 A projected balance sheet and statement of income and expenses for the
ensuing three years, should the proposal be accepted; with assumptions
and contingencies on which the projections are based.
 The authorised director or prescribed officer must confirm that the
information provided appears to be accurate, complete, and up to date,
and declaring that the projections provided are estimates made in good
faith based on factual information and assumptions as set out in the
statement.
 The proposal needs to be adopted by 75% majority support in value of the
creditors present and voting at a meeting called for that purpose.
 The court must sanction the compromise adopted proposal for it to be
enforceable.
 MR must file a copy of the court order sanctioning a compromise with the
Companies Commission within five business days. This becomes binding
to all creditors.

1.3 Section 133, no legal proceeding, including enforcement action, against the
company may be commenced or proceeded with in any forum.
LA Sport 4x4 Outdoor CC v Broadsword Trading 20 (Pty) Ltd & others,
concerned section 133, which provides for a general moratorium on legal
proceedings against a company in business rescue. A cancellation of an

4
 agreement during business rescue constitutes legal process therefore
enforcement action, which falls under the moratorium in section 133(1) which is
prohibited and unlawful while the company remains under business rescue.
In Kythera Court v Le Rendez-vous Café CC 2016 (6) SA 63 (GJ), Boruchowitz J
mentioned that; the business rescue practitioner can invoke section 136(2) 2 to
prevent a landlord from cancelling a lease and from instituting eviction
proceedings.
The business rescue practitioner needs to issue a suspension notice to the
creditor; this will prevent Mahlangu Roadworks from been in breach of any pre-
commencement obligations. This will result in the creditor not to take any action
such as cancelling of lease and re-possess the heavy-duty equipment in line with
the general moratorium in terms of s 133(1) and s 134 (1) (c); which requires the
consent of the business rescue practitioner before the company can dispose of
any property. This was confirmed in the decision held in Cloete Murray NO and
another v FirstRand Bank Ltd ruled on the question of whether cancellation of an
agreement constitutes "enforcement action" prevented by section 133(1) of the
Companies Act.

2
section 136 (2) provides that the business practitioner may, despite any provision of an agreement to the contrary, entirely,
partially, or conditionally suspend, for the duration of the business rescue proceedings, any obligation of the company that
arises under an agreement to which the company was a party at the commencement of the business rescue proceedings.