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LML4806 ASSIGNMENT 2 SOLUTIONS SEMESTER 1 2023
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LML4806 ASSIGNMENT 2 SOLUTIONS SEMESTER 1 2023
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LML4806 COMPANY LAW
ASSIGNMENT 02 SOLUTIONS
SEMESTER 1 2023
BMSA LAW TUTORS
MEL
, 1|Page
Mahlangu Roadworks (Pty) Ltd was awarded a contract by a provincial
government to upgrade and to repair a number of secondary roads in the
province. The company completed the work months ago but has still not
received payment from the provincial government. As a result, the company is
struggling to pay its employees and has not paid other creditors when
payment was due. It has also exhausted its credit facilities at the bank.
The company’s managing director, Mr Mahlangu, believes that the board
should immediately adopt a resolution to place the company under business
rescue because some creditors have threatened to apply for liquidation
of the company if they do not get paid. He fears that once an application
for a liquidation order has been filed with the court, and certainly if a
liquidation order is issued by the court, business rescue will no longer be
possible.
Mr Mahlangu is also worried because the company leases most of the heavy-
duty equipment it uses and although the company has managed to keep up
the payments for this equipment up to now, he is not sure for how much
longer this will be possible. If the company misses any payment the lessors
may cancel the lease and remove their equipment.
Advise Mr Mahlangu on the following aspects:
1.1. With reference to the Companies Act 71 of 2008 and relevant case law,
discuss whether the board of directors may commence business rescue
proceedings (assuming that Mahlangu Roadworks (Pty) Ltd is financially
distressed) after liquidation proceedings have been initiated against
Mahlangu Roadworks (Pty) Ltd. Discuss further whether Mahlangu
Roadworks (Pty) Ltd may be placed under business rescue by any other
party after a liquidation application has already been instituted against
the company as well as after a liquidation order has been issued against
the company.
In terms of section 129 of the Companies Act the board of the company must pass a
board resolution to place the company under business rescue. The company may be
placed under business rescue by the board ONLY if the board has reasonable
grounds to believe that the company is financially distressed and there appears to
be reasonable prospects of rescuing the company.
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