Business Rescue and Suretyship

Can suretyships still be enforced during the business rescue process? Section 133 of the Companies Act provides that during business rescue proceedings, no legal proceedings, including enforcement action, against the company or in relation to any property owned by the company or lawfully in its possession, may be commenced or proceeded with, unless certain conditions are present. But if sureties have signed for the benefit of the company,it’s a different story.

Schindlers Attorneys breaks down the issue https://www.schindlers.co.za/2020/business-rescue-and-suretyship/.

Business Rescue and Suretyship

The COVID-19 pandemic will leave a long-lasting impact on businesses worldwide.  The rapid spread of the illness and the subsequent nationwide lockdown imposed in South Africa have forced businesses to take practical and pro-active steps to mitigate losses and ensure their survival. Naturally, the success or failure of these businesses is inherently linked to the subsistence and welfare of their stakeholders, which include an entity’s employees, shareholders, owners, sureties, creditors and debtors. Regrettably, not many companies will have to consider the prospect of entering into business rescue, in order to effectively react to the current state of uncertainty.