Business rescue practitioners

In Shiva Uranium (Pty) Limited (In Business Rescue) and Another v Tayob and Others 2022 (2) BCLR 197 (CC), if a company enters business rescue voluntarily in terms of s 129, the power to appoint a substitute, if the practitioner resigns, remains with the company.  

By Merilyn Rowena Kader LLB (Unisa), Legal Editor at LexisNexis South Africa.

Company law - Business rescue practitioners: In Shiva Uranium (Pty) Limited (In Business Rescue) and Another v Tayob and Others 2022 (2) BCLR 197 (CC), the board of directors of Shiva resolved to place it in business rescue in terms of s 129 of the Companies Act 71 of 2008 (the Act). The board appointed Messrs Klopper and Knoop as Shiva’s business rescue practitioners. The Industrial Development Corporation, a major creditor of Shiva, brought an application in terms of s 130(1)(b) of the Act to remove Klopper and Knoop as the business rescue practitioners and to replace them with one Mr Murray in terms of s 130(6)(b) of the Act. When the application was due to be heard, Klopper and Knoop resigned. An order was made by consent, which recorded the resignation of Klopper and Knoop, appointed Mr Murray as the new business rescue practitioner and directed the Companies and Intellectual Property Commission (the CIPC) to appoint an additional business rescue practitioner to assist Mr Murray. Second applicant, Mr Monyela, was then appointed by the CIPC as an additional business rescue practitioner. Later Mr Murray resigned. Prior to his resignation, Mr Murray and Mr Monyela passed a resolution to appoint third respondent, one Mr Damons, as Mr Murray’s replacement. This resulted in a dispute.

Shiva’s board passed a resolution resolving to appoint first and second respondents, Mahomed Tayob and Eugene Januarie, as the company’s business rescue practitioners. Mr Monyela, on his own behalf and purportedly on behalf of Shiva, brought proceedings in the Companies Tribunal (the Tribunal) to compel the CIPC to accept the filing of Mr Damons’ appointment and to remove the filing of Messrs Tayob and Januarie’s appointments. The Tribunal decided the case in Mr Monyela’s favour. Messrs Tayob and Januarie approached the High Court seeking to interdict the CIPC from implementing the Tribunal’s ruling. The High Court dismissed the application, holding that following a resignation by a business rescue practitioner, in casu Mr Murray, the board could only appoint Messrs Tayob and Januarie as business rescue practitioners with the authorisation of Mr Monyela in accordance with s 137(2) of the Act. Messrs Tayob and Januarie appealed against this decision to the SCA.

The SCA held that the powers and duties of the practitioner related to the ‘management’ of the company, namely running the company on a day-to-day basis. A decision taken by directors on behalf of the company to appoint a substitute practitioner in terms of s 139(3) was an act of governance falling outside the ambit of the practitioner’s ‘management’ of the company. Accordingly, the board had not required the approval of the company’s business rescue practitioners in order to appoint Messrs Tayob and Januarie. The SCA held that if a company enters business rescue voluntarily in terms of s 129, the power to appoint a substitute, if the practitioner resigns, remains with the company. Conversely, if a company enters business rescue compulsorily, the power to appoint a substitute, if the practitioner resigns, remains with the affected person who brought the original application for business rescue.

Applicants approached the CC seeking leave to appeal against the judgment of the SCA. In a unanimous judgment (per Rogers AJ with Madlanga, Majiedt, Mhlantla, Theron, Tshiqi JJ, Madondo, Pillay and Tlaletsi AJJ concurring) the court dismissed the application for leave to appeal. The court found that it would have jurisdiction to hear the appeal because the question that arose was one of public importance. However, the fact that the matter engaged the court’s jurisdiction did not mean, without more, that it was in the interests of justice to hear the appeal. The court observed that the question that arose was the following: Where, in the case of a voluntary business rescue initiated in terms of s 129 of the Act, a business rescue practitioner appointed by a court in terms of s 130(6)(a) in place of the company-appointed practitioner resigns, who has the power to appoint the court-appointed practitioner’s replacement? The answer to that question depended on the proper interpretation of s 139(3).

The court held that the SCA had correctly concluded that on Mr Murray’s resignation the right to appoint his replacement vested in Shiva’s board of directors and that Messrs Tayob and Januarie had thus been validly appointed. It followed that there were no prospects that applicants’ contentions would succeed. It was not in the interests of justice to hear the appeal. The application for leave to appeal fell to be dismissed.

Merilyn Rowena Kader
Legal Editor at LexisNexis