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.

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

Answer rating: 100% (QA)

The South African Companies Act 71 of 2008 provides the legal framework for business rescue and liquidation proceedings and addresses the questions ra... View the full answer