BUSINESS LAW & TAX Business rescue is not certain

Evan Pickworth Business Law & Tax Editor

It is never good to see a business go down, especially when they have so much potential

However, times are tough and many businesses are walking that fine line between being able to make their month-end salary run and pay suppliers on time

Golden Harvest is well known in the agriculture and food space in SA and from humble beginnings as a fruit and vegetable store it soon operated a large wholesale fruit distribution business at premises in Cape Town and

Johannesburg

The staff complement in its heyday was at 180 employees It had met the president, was majority black-owned (via Forty Squares) and was focused on supporting local supply chains, while having a strong export footprint, but it hit hard times in 2022 and could not pay suppliers, despite being in business for 40 years

However when the rubber hit the road after Covid19, a disgruntled supplier was owed R1 4m and lodged an application for provisional winding-up A final order of winding-up was later granted and the liquidators secured an order to proceed with an inquiry into the affairs of the company Total liabilities were said to be more than R136m, with R12 5m owed to the landlord

Forty Squares and some of the employees of Golden Harvest then lodged an application to place the liquidated company into business rescue in terms of section 131 of the Companies Act 71 of 2008 Major creditors said they would not support the plan

In essence, business rescue can be initiated either by means of a company resolution (s 129), or by court order (s 131) A company resolution may, however, not be adopted once liquidation proceedings have been initiated by or against the company (s 129(2)(a)) The bar is higher when a company has been wound up But the applicant does temporarily lift the liquidation proceedings

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The court found that there were no anticipated circumstances that would radically improve the prospects of Golden Harvest being returned to solvency and commercial viability The proposed three years for the rescue plan was also found to be extraordinarily long and the haste with which this the rescue application was brought suggested “that it is not bona fide”

Clearly, business rescue is not going to work in all cases, especially when creditors have lost faith