“Reasonable prospect” of business rescue is required

In Oakdene Square Properties (Pty) Ltd and Others v Farm Bothasfontein (Kyalami) (Pty) Ltd and Others 2013 (4) SA 539 (SCA) it was held that, according to s 128(1)(h) of the the Companies Act, ‘rescuing the company’ meant ‘achieving the goals set out in the definition of business rescue.’ The potential business rescue plan that s 128(1) contemplated had two goals, namely a primary goal, which was to facilitate the continued existence of the company in a state of solvency and, a secondary goal, which was provided in the alternative in the event that the achievement of the primary goal proved not to be viable, namely to facilitate a better return for the creditors or shareholders of the company than would result from immediate liquidation.

It followed that the achievement of any one of the two goals referred to in s 128(1) would qualify as ‘business rescue’. The ‘reasonable prospect’ test for achieving any of the required goals was generally accepted to be a lesser requirement than the ‘reasonable probability’, which was the yardstick for placing a company under judicial management in terms of s 427(1) of the Companies Act 61 of 1973. However, ‘reasonable prospect’ required more than a mere prima facie case or an arguable possibility. ‘Reasonable prospect’ should be based on reasonable grounds. A mere speculative suggestion would not be enough.

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