Though seemingly straightforward, section145 and impliedly, s131 of the Companies Act, No 71 of 2008 remain points of litigation on a regular basis in the courts. The sections set out, in detail, the rights and obligations of creditors when participating in the business rescue procedure as a whole. In terms of s145, creditors are entitled to:

  • formally participate in a business rescue process to the extent permissible in terms of chapter 6 of the Act; and
  • informally participate in those proceedings by making proposals for a business rescue plan to the business rescue practitioner.

Participation by any means may be hindered where a creditor has not been properly notified or informed of a court proceeding, decision, meeting or other relevant event concerning business rescue proceedings of the company. The legislature, for this reason, conferred a general right of notification on creditors in s145(1)(a).

Contiguous with the right of notification in s145(1)(a) is the right contained in s145(1)(b) which provides that each creditor is entitled to participate in any court proceedings taking place during the business rescue proceedings. While the methods for notification must comply with those prescribed in the Companies Regulations of 2011, the question which arises is how, as a matter of procedure, a creditor is required to go about participating in the court proceedings.

In the well-known case of Cape Point Vineyards (Pty) Ltd v Pinnacle Point Group Limited and another (Advantage Project Managers (Pty) Ltd intervening) [2011] (5) SA 600 (WCC), a creditor applied for leave to intervene in compulsory business rescue proceedings to oppose the relief sought by the applicant, Cape Point Vineyards. The intervening creditor applied for leave to intervene against the granting of an order placing the Pinnacle Point Group under supervision and business rescue proceedings. The court somewhat frankly remarked that it could not have been the contemplation of the legislature that an affected party would have to apply for leave to intervene in the proceedings. If a person is an 'affected person', such person has a right to participate in the hearing. Further filing of affidavits by the intervening party would be regulated by the court.

The approach of Boruchowitz J in Engen Petroleum Ltd v Multi Waste (Pty) Ltd [2011] JOL 28082 (GSJ) accorded with that of the Western Cape High Court. The applicant in this case was an intervening creditor seeking to oppose the grant of an order for the placement of two companies under supervision and to commence business rescue proceedings in terms of s131 of the Act. Boruchowitz J recorded however that, although it would not require leave of the court for an affected person to participate in a hearing, such leave may be necessary as a procedural requirement.

More recently, in AG Petzetakis International Holdings Ltd v Petzetakis Africa Ltd & Others [2012] JOL 28598 (GSJ), one of the intervening applicants was a creditor of Petzetakis Africa. The creditor had a concurrent claim amounting to R45 million. They were not cited as a respondent in the business rescue application and thus, sought to intervene in that application. The court again referred to the Cape Point Vineyards and Engen Petroleum cases and followed the approach taken by the judges in those matters by allowing the intervention. Further, a registered trade union was the second intervening applicant. The court held that the registered trade union, as a representative of the employees of the company, has an automatic right to participate in the proceedings, without an order authorising them to do so, in terms of s130(4) of the Act.

From this, it is apparent that there are two crucial points which may affect a creditor during the business rescue proceedings, namely, notification and participation. The burden of notification rests with the distressed company and while participation is a conferred right, an application to formally intervene and be placed on record as a party to the court proceedings may be procedurally advantageous. Although the Supreme Court of Appeal is yet to pronounce on this issue, the dicta of various high courts have so far been in agreement regarding notification and participation, even by means of intervention, of creditors in a business rescue process.