LML4806
Assignment 2
Semester 2024
Due 18 September 2024
, Question 1
Barbara, as a business rescue practitioner of Thirsty Elephants (Pty) Ltd, faces a
situation where one of the secured creditors, Winelands Packers (Pty) Ltd, has voted
against the adoption of the business rescue plan. Given that all other creditors, both
secured and unsecured, have voted in favor, Barbara is understandably concerned
about the negative impact of this dissenting vote on the successful rescue of the
company.
Grounds for Application to Set Aside the Vote
According to Section 153 of the Companies Act 71 of 2008, Barbara can indeed
apply to the court to set aside Winelands Packers (Pty) Ltd’s vote if it can be shown
that the vote was inappropriate or unreasonable and prejudiced the interests of other
affected parties. Specifically, Section 153(1)(a)(ii) allows an affected person (which
includes the business rescue practitioner) to apply to a court to set aside a vote on a
business rescue plan if it is believed that the vote was unreasonably prejudicial to
the interests of the company, creditors, or employees.
Factors the Court Should Consider
1. Reasonableness of the Vote: The court will assess whether Winelands
Packers’ vote was reasonable given the circumstances. This in volves looking
at whether the creditor’s decision was based on a rational assessment of their
own interests and the company's interests.
2. Impact on Other Creditors and Employees: The court will also consider the
potential prejudice to other creditors and employees if the plan is not adopted.
If the court finds that the rejection of the plan by Winelands Packers (Pty) Ltd
disproportionately harms these parties, it may be more inclined to set aside
the vote.
3. Provisions in the Business Rescue Plan: The court will evaluate the terms of
the business rescue plan, especially those that protect the interests of
secured creditors. If the plan is fair and equitable to all parties, including
Winelands Packers, the court may view their dissent as unreasonable.
Effect of Setting Aside the Vote
If the court decides to set aside Winelands Packers (Pty) Ltd’s vote, the business
rescue plan will be considered as approved by the requisite majority. This means
that the rescue plan can proceed, potentially leading to the successf ul turnaround of
Thirsty Elephants (Pty) Ltd. This outcome would benefit not only the company but
also its employees and other creditors, aligning with the overall purpose of business
rescue, which is to rehabilitate financially distressed companies in a w ay that
balances the rights and interests of all stakeholders.
