Vol 23 (2026) - Issue 5

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The South African Business Rescue Practitioner’s Duty to Rectify under Section 141(2)(c): Interpreting Sections 141(2)(c)(i) and 141(2)(c)(ii) and the Theoretical Application of Section 165 of the Companies Act 2008

Synopsis
Chapter 6 of the Companies Act 2008 regulates business rescue proceedings for companies in South Africa.
Business rescue proceedings are not regulated by the Insolvency Act of 1936, as the 1936 Act deals with the liquidation proceedings of companies. Business rescue, by contrast, is aimed at rehabilitating a financially distressed company. In liquidation proceedings the company is dissolved, often with severe consequences, including the loss of employment opportunities. The purpose of business rescue is therefore not necessarily to make the company a successful enterprise, but an attempt to make the company more economically viable. For this reason, a business rescue practitioner is appointed and the manner in which the practitioner rehabilitates the company is not always regulated by fixed statutory rules. The practitioner may take any necessary step to rectify wrongdoing that may have contributed to the company entering business rescue proceedings. The 2008 Act, however, does not define the concept of 'rectification'. This article therefore illustrates the different legal consequences of rectifying a wrong in terms of sections 141(2)(c)(i) and 141(2)(c)(ii)(bb) of the 2008 Act. Both subsections deal with a wrongdoing, but the outcomes may differ significantly. Under section 141(2)(c)(i), the business rescue practitioner is empowered to take any necessary steps personally to rectify the wrongdoing. In this regard, the provision promotes the efficient rescue of the company.
By contrast, section 141(2)(c)(ii)(bb) merely permits the practitioner to direct the board of directors to rectify the wrongdoing, without empowering the practitioner to prescribe how the board of directors must do so. If the board delays or refuses to rectify the matter, the practitioner could, in theory, make use of section 165 by instituting a derivative action on behalf of the company to recover the losses suffered.