Business rescue legislation: Part D - Development and approval of business rescue plan

 

Go to Business rescue legislation forums to discuss these individual sections of Chapter 6 of the Companies Bill, 2007.

153. Proposal of a business rescue plan

(1) Under the supervision and with the advice of the supervisor, the management of the company must prepare a business rescue plan for consideration and possible adoption at a meeting held in terms of section 154.

(2) The business rescue plan must specify at least the following information, but may contain any additional information that will assist affected persons in deciding whether or not to accept or reject the plan:

(a) the property of the company that is to be available to pay creditors’ claims in terms of the business rescue plan;

(b) the nature and duration of any moratorium for which the business rescue plan makes provision;

(c) the extent to which the company is to be released from the payment of its debts, and the extent to which any debt is proposed to be converted to equity in the company, or another company;

(d) the treatment of contracts and ongoing role of the company;

(e) the conditions, if any, for the business rescue plan to come into operation;

(f) the conditions, if any, for the business rescue plan to continue in operation;

(g) the circumstances in which the business rescue plan will end;

(h) the order of preference in which the proceeds of property will be applied to pay creditors if the business rescue plan is adopted; and

(i) the effect of the plan, if any on the number of employees, and their terms and conditions of employment.

(3) A business rescue plan must be accompanied by a statement containing at least the following information:

(a) a complete list of all the assets of the company, as well as an indication as to which assets were held as security by creditors when the business rescue proceedings began;

(b) a complete list of the creditors of the company when the business rescue proceedings began, as well as an indication as to which creditors would qualify as secured, statutory preferent and concurrent in terms of the laws of insolvency, and an indication of which of the creditors have proved their claims;

(c) a complete list of the equity holders of the company, and the effect that the business rescue plan will have on them;

(d) the probable dividend that would be received by creditors, in their specific classes, if the company were to be placed in liquidation;

(e) the benefits of adopting the business rescue plan as opposed to the benefits that would be received by creditors if the company were to be placed in liquidation;

(f) whether the business rescue plan includes a proposal made informally by a creditor of the company;

(g) a copy of the written agreement concerning the supervisor’s remuneration; and

(h) a projected -

(i) balance sheet for the company; and

(ii) statement of income and expenses for the ensuing three years, prepared on the assumption that the proposed business plan is adopted.

(4) The projected balance sheet and statement required by subsection (3)(h) –

(a) must include a notice of any significant assumptions on which the projections are based; and

(b) may include alternative projections based on varying assumptions and contingencies.

(5) The statement required by subsection (3) must conclude with a certificate by the company stating that -

(a) any factual information provided is accurate, complete, and up to the date; and

(b) any projections provided are estimates made in good faith on the basis of factual information and assumptions as set out in the statement.

(6) The business rescue plan must be published by the company within 25 business days after the date on which the supervisor was appointed, or such longer time as may be allowed by –

(a) the court, on application by the company; or

(b) the holders of a majority of the voting interests.

154. Meeting to determine future of company

(1) The supervisor must convene and preside over a meeting of creditors and any other holders of a voting interest, called for the purpose of considering the proposed rescue plan within -

(a) 10 business day after the publication of that plan in terms of section 153; or

(b) a shorter period as approved by –

(i) the court, on application by the supervisor; or

(ii) unanimous consent of -

(aa) the holders of a voting interest; and

(bb) shareholders entitled to vote in term of section 155(3)(b).

(2) At least 5 business days before the meeting contemplated in subsection (1), the supervisor must deliver a notice of the meeting to all affected persons, setting out -

(a) the date, time and place of the meeting;

(b) the agenda of the meeting; and

(c) a summary of the rights of affected persons to participate in and vote at the meeting.

(3) The meeting contemplated in this section may be adjourned from time to time, but may not be adjourned to a day that is more than 60 business days after the day on which the supervisor was appointed, even if no decision regarding the company’s future has been taken at the meeting.

155. Consideration of the business rescue plan

(1) At the meeting convened in terms of section 154, the supervisor must –

(a) introduce the proposed business plan for consideration by the creditors and any other holders of a voting interest;

(b) inform the meeting whether the supervisor continues to believe that there is a reasonable prospect of the company being rescued;

(c) provide an opportunity for the employees’ representatives to address the meeting;

(d) invite discussion, and entertain and conduct a vote, on any motions to -

(i) amend the proposed plan, in any manner moved and seconded by holders of voting interests, and satisfactory to the supervisor; or

(ii) direct the supervisor to adjourn the meeting in order to revise the plan for further consideration, subject to section 154(3); and

(e) call for a vote for adoption of the proposed plan, as amended if applicable, unless the meeting has first been adjourned in accordance with paragraph (d)(ii).

(2) If adoption of the proposed business plan was opposed -

(a) by the holders of more than 50% of the voting interests that were voted in terms of subsection (1)(e), or

(b) by more than 25 % of the independent creditors’ voting interests, if any, that were voted in terms of subsection (1)(e) the plan has failed to be adopted.

(3) If the proposed business plan did not fail to be adopted, as contemplated in subsection (2), and

(a) the plan does not affect the interests of any class of shareholders, the business rescue plan will have been adopted, subject to any conditions on which the plan is contingent; or

(b) the plan does affect the interests of any class of shareholders, the supervisor must immediately hold a meeting of the class, or classes of shareholders affected by the plan, and call for a vote by those shareholders to approve the adoption of the proposed business rescue plan.

(4) If the holders of at least a majority of the shares that were voted in terms of subsection (3)(b) support approval of the proposed business plan, the plan will have been adopted, subject to any conditions on which the plan is contingent.

(5) A business rescue plan that has been adopted is binding on the company, and on each of the creditors and shareholders of the company, whether or not -

(a) they were present at the meeting;

(b) they voted in favour of adoption of the plan; or

(c) in the case of creditors, they proved their claims against the company.

(6) The company, under the direction of the supervisor, must take all necessary steps to -

(a) attempt to satisfy any conditions on which the business rescue plan is contingent; and

(b) implement the plan.

(7) When the business rescue plan has been implemented, the supervisor must file with the Commission a Notice of the Substantial Implementation of the business rescue plan.

156. Failure to adopt business rescue plan

(1) If a business rescue plan is not adopted as contemplated in section 155 -

(a) the supervisor may -

(i) seek a vote of approval from the holders of voting interests to prepare and publish a revised plan; or

(ii) advise the meeting that the company will apply to the court to set aside the result of the vote by the holders of voting interests or shareholders, as the case may be, on the grounds that it was inappropriate or egregiously irrational; and

(b) if the supervisor does not take any action contemplated in paragraph (a) –

(i) any affected person present at the meeting may -

(aa) call for a vote of approval from the holders of voting interests requiring the supervisor to prepare and publish a revised plan; or

(bb) apply to the court to set aside the result of the vote by the holders of voting interests or shareholders, as the case may be, on the grounds that it was inappropriate or egregiously irrational; or

(ii) any affected person, or combination of affected persons, may make a binding offer to purchase the voting interests of any person who opposed adoption of the business rescue plan, at a value that the supervisor determines to be the probable return to that person if the company were to be liquidated.

(2) If a person makes an offer contemplated in subsection (1)(b)(ii), the supervisor must -

(a) adjourn the meeting until the transaction has been completed;

(b) make any necessary revisions to the business rescue plan to appropriately reflect the results of the transaction; and

(c) set a date for resumption of the meeting, at which the provisions of section 155 will apply afresh.

(3) If no person takes any action contemplated in subsection (1) or (2), the supervisor must promptly file with the Commission a Notice of the Termination of Business Rescue Proceedings.

(4) A holder of a voting interest, or a person offering to acquire that interest, may apply to the court to review, re-appraise and re-value a determination by the supervisor in terms of subsection (1)(b)(ii).

157. Discharge of debts and claims

(1) A business rescue plan may provide that, if it is implemented in accordance with its terms and conditions, a creditor who has acceded to the discharge of the whole or part of a debt owing to them will lose the right to enforce the relevant debt or part of it.

(2) Creditors and other holders of voting interests who have not participated in the business rescue proceedings are not entitled to enforce any debt that arose before those proceedings began, unless the business rescue plan is not approved, or not implemented.

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