LML4806 ASSIGNMENT 02 2024 SEMESTER 01
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, Question: 1
Coffee Bean Lovers (Pty) Ltd (‘the company’) buys coffee from Kenya and distributes it to
different coffee shops in South Africa. Due to an infestation of bugs at one of the coffee
plantations, the company will not be able to get deliveries of coffee from Kenya for the next
three months. Instead, .the company will have to import coffee from Uganda at a much
higher cost. As a result, the company’s cash flow will be affected severely. Pat, one of the
directors of Coffee Bean Lovers (Pty) Ltd, has informed Jane and Steven, two of the
employees of the company, that the company may face serious financial difficulties in the
next three to twelve months and that they will not be paid their salaries for the next two
months as the company will first have to pay other creditors. Jane and Steven have heard
about business rescue, and are of the view that business rescue
proceedings may be appropriate in the circumstances to assist the company to survive and
to ensure that they will still be paid their salaries. Jane and Steven approach you for advice
on business rescue proceedings. With reference to the relevant statutory provisions:
1.1 Explain what business rescue is and indicate the circumstances in which business
rescue proceedings may be used.
Section 128(1)(b) of the Companies Act 71 of 2008 defines business rescue as proceedings
to facilitate the rehabilitation of a financially distressed company by:The temporary
supervision of the company, and of the management of its affairs,business and property.
A temporary moratorium on the rights of claimants against the company or in respect of its
property in its possession.
The development and implementation, if approved, of a plan to rescue the company, or, if
not possible, a plan to achieve a better return for the company'screditors than the payment
they would have received if the company had been liquidated immediately.
D In terms of section 128(1)() of the Companies Act 71 of 2008 a company will be
financially distressed when:
• the company is reasonably unlikely to be able to pay all its debts as they become
due and payable within the next six months, or