REPUBLIC OF SOUTH AFRICA



IN THE HIGH COURT OF SOUTH AFRICA
GAUTENG DIVISION, PRETORIA

Case Number: 2024 -063817



In the matter between:

In the matter between:

SALMON DANNHAUSER NEL N.O First Applicant

MUKS BUSINESS ENTERPRISE CC
T/A MUKS AUTOBODY (in business rescue) Second Applicant

and

MUKELA MULAUDZI First Respondent

MAXIMUM INVESTMENTS (PTY) LTD Second Respondent

ANTKORS (PTY) LTD Third Respondent

THE SOUTH AFRICAN REVENUE SERVICES Fourth Respondent
(1) REPORTABLE: NO
(2) OF INTEREST TO OTHER JUDGES: NO
(3) REVISED: YES

______________ _________________________
DATE SIGNATURE

Delivered: This judgment was prepared and authored by the Judge whose name is
reflected and is handed down electronically by circulation to the parties/their legal
representatives by e -mail and by uploading it to the electronic file of this matter on
Caselines . The date and fo r hand -down is deemed to be 05 May 2025 .

Summary: A Business Rescue Practitioner (BRP) is statutorily empowered to
conclude that there is no reasonabl e prospects for the company to be rescued
and to apply to Court for an order (a) discontinuing the business rescue
proceedings and (b) placing the company into liquidation. Once a company i s
under business rescue, the BRP has full management control of the company
in substitution for its board and pre -existing management. A Court must
discontinue business rescue proceedings on the strength of the conclusions
made by the BRP. The replaced board or pre -existing management ca nnot
conclude otherwise. The view that there are no reasonable prospects for the
company to be rescued is to be solely formed by the BRP and no one else.

Where a company is unable to pay its debts when they become due, such a
company is liable to be woun d up by the Court. A company that enters the
business rescue proceedings is one that would have formed a view that it is
reasonably unlikely to pay all of its debts as they become due and payable
within the immediately ensuing six months. The reasonable li kelihood is that
such a company will become insolvent within the immediately ensuing six
months. It has been proved to the satisfaction of this Court that the company
is, taking into account its contingent and prospective liabilities, unable to pay
its deb ts and it appears to be just and equitable that the company should be
wound up. Held: (1 ) The draft order presented by the applicants is made an
order of Court.


JUDGMENT
MOSHOANA, J

Introduction

[1] By definition, business rescue means proceedings to facilitate the rehabilitation
of a company that is financially distressed by amongst others providing for the
temporary supervision of the company, and management of its affairs, business
and property1. A company is financially distressed i f it appears to be reasonably
unlikely that the company will be able to pay all of its debts as they become due
and payable within the immediately ensuing six months or it appears to be
reasonably likely that the company will become insolvent within the im mediately
ensuing six months2.

[2] A company faced with a financial distress is entitled to resolve that it voluntarily
begin business rescue proceedings and place itself under supervision, if its
board has reasonable grounds to believe that (a) the company i s financially
distressed; and (b) there appears to be a reasonable prospect of rescuing the
company. A rescue must mean a facilitation to rehabilitate the company from
the doldrums of financial quandaries.

[3] The above said, before this Court serves two appl ications. The first application
is launched by Mr Salmon Dannhauser Nel (BRP) in his official capacity as a
business rescue practitioner, appointed in terms of section 138(1) of the CA, for
Muks Business Enterprise CC t/a Muks Autobody (Muks). In the first
application, the BRP and Muks seek an order discontinuing the business
rescue proceedings and placing Muks under final or alternatively provisional
liquidation, together with an order of costs. The second application is launched
by Mr Mukela Mulaudzi (Mr Mulaudzi), the sole member of Muks. In the second
application, Mr Mulaudzi is seeking an order setting aside the resolution
adopted by Muks to begin business rescue proceedings and placing itself under
supervision on the grounds that there is no reasonable basis for believing that it
is financially distressed as envisaged in section 130(1)(a) of the CA.
Alternatively, that the BRP is removed in terms of the provisions of section

1 See section 128(1)(b)(i) of the Companies Act 71 of 2008 as amended (CA).
2 See section 128(f)(i)(ii) of the CA.
139(2) of the CA. Mr Mulaudzi also sought punitive costs order against the
BRP.

[4] Another feature of the two applications is that upon observing that Mr Mulaudzi
was allegedly dissipating the funds of Muks, the first application was
accelerated to be heard as one of urgency. As a result, the present application
was converted into a sp ecial motion, which served before me. Additionally,
Muks Logistics (Pty) Ltd (Logistics), an alleged creditor of Muks, was joined
after seeking an intervention. In relation to the intervention application, what
remained as a live issue before me was the is sue of costs.

[5] It must be stated upfront that should this Court place Muks under liquidation, be
it provisional or final, the entire second application will be rendered moot.
Effectively, this Court as contemplated in section 132(2)(a)(ii) of the CA would
have ended the business rescue proceedings. Once ended, the resolution of
beginning business rescue and the appointment of a BRP would become
academic and moot.

Brief factual exposition and evidence

[6] In the present application a lot which was unnecessar y has happened. A simple
liquidation application generated in excess of 500 pages to a point that such a
simple application was crowded out of the urgent Court. Accordingly, it is
obsolete in this judgment to punctiliously narrate all the happenings in thi s
application. Only salient facts will be rendered in this judgment. On 31 October
2023, Mr Mulaudzi signed a resolution which was supported by a sworn
statement. Importantly, the resolution stated the following:

“RESOLVED THAT
(1) By unanimous agreement of th e members and with effect
from 31 October 2023, MUKS Business Enterprise
(hereinafter referred to as the ‘Close Corporation’)
voluntarily begins business rescue proceedings and that the
Close Corporation be placed under supervision as envisaged
in Section 129(1)…, as the member has reasonable
grounds to believe that:
(a) The Close Corporation is financially distressed ; and
(b) There appears to be a reasonable prospect of rescuing
the Close Corporation.

[7] Under oath, Mr Mulaudzi stated amongst other things, the following:

“7.2 The Close Corporation has been facing significant cash flow
challenges, which in the main can be attributed to delayed client
payments, unexpected expenses, and market fluctuations, resulting
therein that the Close Corporation’s cash flows have been insuff icient
to meet its operational and financial obligations. This in turn has
negatively impacted the Close Corporation’s working capital reserves,
limited its ability to effectively adapt to market changes, and hamstrung
its ability to seize identified growt h opportunities.
7.3 The aforementioned led to a sharp decrease in revenue which
ultimately resulted in trading losses that are systematically eroding the
Close Corporation’s working capital and cash reserves.
7.4 Although austerity measures have been put in place to mitigate
its financial burdens, the severely restrained cash flow situation is
untenable and has led to accumulation of substantial arrears.
7.6 As a result of the factors mentioned hereinbefore the Close
Corporation will not be in a position to settle trade and other creditors in
full in the short term. As such the Close Corporation is financially
distressed as defined in section 128(f) of the Act, as amended, in that
it appears reasonably unlikely that the Close Corporation will be able
to pa y all its debts as they become due and payable within the next
six months.

[8] As a sequel of the above, on 2 November 2023, the first BRP was appointed.
For reasons not to be fully entertained in this judgment, on 1 February 2024,
the first BRP resigned. Wh ereafter, Mr Mulaudzi resolved to appoint the first
applicant as a BRP effective 1 February 2024. From 7 February 2024 up to 7
June 2024, the BRP placed various requests in order to facilitate the
rehabilitation of Muks. Th ese attempts, on the version of t he BRP , were fobbed
and stonewalled. It is unnecessary for the purposes of this judgment to
considerably entertain the reasons for and against the fobbing and
stonewalling. It suffices to mention that in that period of five months, a business
plan was not produced as required by the CA. Such failure to produce a plan is
evidence enough that rehabilitation was not facilitated.

[9] The BRP discovered that the funds of Muks were syphoned out of its bank
account by Mr Mulaudzi. In an attempt to prevent a further h aemorrhage, the
BRP resolved to freeze the bank account. With considerable regret , the BRP
was outwitted. Invoices were issued where the funds belonging to Muks were
diverted to another bank account. In the midst of all the se happe nings, on 19
June 2024 an invisible and unidentified person masquerading as the BRP filed
with the CIPC of the Republic of South Africa, a notice terminating the business
rescue proceedings. Given the approach this Court takes at the end, it is
unnecessary for this Court to unmask the invis ible.

[10] On the version of the BRP, Muks has about 12 creditors which Muks is unable
to pay. The total amount owing to those creditors is in the region of
R8 000 410.12. The version of Mr Mulaudzi with regard to these creditors is so
far-fetched and untenable. It must be rejected on the strength of the evidence
exposed by the BRP on affidavit. It is equally unnecessary for the purposes of
this judgment to discuss the version of Mr Mulaudzi herein. The BRP alleged
that Muks is both factually and comme rcially insolvent. With cons iderable
respect, f or very flimsy reasons, Mr Mulaudzi disputes this.

[11] As indicated elsewhere in this judgment, Mr Mulaudzi alleged that he was
alerted by his counsel that he made a bona fide mistake by alluding that Muks
owes a substantial amount of rental. The discovered facts are that Logistics is
the de jure tenant whilst Muks is a de facto tenant. As such, Mr Mulaudzi was in
error when he contended that the landlord has an executable judg ment against
Muks. On the basis of that revelation, the second application was launched. On
Mr Mulaudzi’s version Muks is now liquid and is able to pay its debts when they
become due and payable .

Analysis

[12] Given what was stated at the dawn of this judgment , it is apposite for this Court
to consider the liquidation application first. It must be stated upfront that the
prevailing legislation dealing with wounding up of companies does not provide
for provisional or final liquidation. Section 344 of the Compani es Act (Old Act)3
sets out the circumstances under which company may be wound up by Court.
In terms of section 344, a company may be wound up if any of the eight
circumstances exists. In the present application, the BRP alleges that Muks is
unable to pay its debts and that it is just and equitable for it to be wound up.

Is Muks unable to pay its debts?

[13] As a departure point , in October 2023, the sole member of Muks , under oath ,
stated in no uncertain terms that for a barrage of reasons, it is financially
distressed and unable to pay its debts when they fall due. The fact that , for
obvious reasons, the member seeks to make a volte face , is of no moment. The
statement made by the member had legal consequences. One such
consequence is that a BRP was appointed. A BRP is appointed to facilitate the
rehabilitation of a financially distressed company. Most importantly, section
140(1)(a) of the CA provides that the full management control of the company
vests within the powers of the BRP of a company under business r escue.
Accordingly, it is the BRP who can indicate to any Court that a company under
business rescue is no longer in financial distress and is able to pay its debts
when they fall due.

[14] The version of Mulaudzi that Muks does not have creditors is far -fetch ed and
inconsistent with a statement he made under oath that Muks was financially
distressed. By way of an example, it is undisputed that South African Revenue

3 Act 61 of 1973.
Services (SARS) is being owed money. Because Muks is unable to pay the
SARS debt it allegedly sought to enter into arrangements for payment of the
debt owed and due to SARS. Section 345(1)(a) of the old Act provides that a
company shall be deemed to be unable to pay its debts if a creditor to whom
the company is indebted in the sum has served a deman d and the company
has for three weeks thereafter neglected to pay the sum or to secure or
compound for it to the reasonable satisfaction of the creditor. Other than a bare
denial, Mulaudzi provides no evidence that SARS has compounded the debt to
its satis faction. Instead there is evidence in the form of correspondence dated
24 July 2024 from SARS indicating that no arrangements with SARS were
captured on its system.

[15] Accordingly , this Court is satisfied that Muks is unable to pay its debts, as such
the cir cumstances contemplated in section 344(f) read with section 345(1)(a) of
the old Act has arisen. Such circumstances give rise to a winding up of Muks.

Is it just and equitable that Muks must be wound up?

[16] As a departure point, it is just and equitable for t he benefit of the body of
creditors to wind up a company that is unable to pay its debts when they fall
due and payable. Although Mr Mulaudzi seeks to justify his conduct of not
cooperating with the BRP, there is clear evidence of non -cooperation. Twenty
five days after the appointment of t he BRP, no plan was developed as required
by section 150 (5) of the CA. This Court disagrees with a submission or view
that the lapse of the twenty five days marks the automatic lapse of the business
rescue proceedings. Section 132 deals with the duration o f business res cue
proceedings. Section 132(3) implies that the lifespan of business rescue
proceedings is three months, which period is extendable by a court order.
Given what the plan must contain, as prescribed by section 150(2) of the CA ,
absent coopera tion from member (s) of a company , it is an arduous or
impossible task to develop a plan. Section 137(2)(b) of the CA expressly impels
Mr Mulaudzi to exercise any management function with the express instructions
or direction of the BRP. All the instruction s and directions issued by the BRP
cannot be viewed to be unreasonable. A submission that the BRP could have
obtained certain of the requested information from third parties is, with respect ,
preposterous to the extreme. Cumulatively the non -cooperation mu st leads to a
just and equitable basis to wind up a company. Regard being had to the
purpose of business rescue process, lack of cooperation simply deepens and
accelerate the need to wind up a financially distressed company.

[17] Mr Mulaudzi admits that during the business rescue proceedings, in clear
contradiction with section 140(1)(a) of the CA, he had to divert the funds of
Muks in order to pay the debts of Muks. This conduct on its own justifies and
provides equitable basis for Muks to be liquidated. This Court , in STS Tyres
(Pty) Ltd v Bamboo Rock (Pty) Ltd (STS Tyres )4, expressed itself in the
following terms, which supports the requirements of just and equitability:

“[28] A company that begins business rescue proceedings is one that
is financially distressed. A company that is financially distressed is no
different from a company that is unable to pay its debts when they fall
due in terms of section 344(f) of the Companies Act, 1973. A company
that is unable to pay its debts may be wound up by a Court. The reality
is that a company in financial distress is a candidate for both winding
up and business rescue. Should one of the possible processes
commence before the other , different legal consequences may arise.
For an example, a company which is unable to pay its debts, although
a candidate for winding up, may be rescued to a point of being able to
pay its debts. However, in my view, such does not detract from the fact
that a Court may, if it is proved to its satisfaction that a company is
unable to pay its debts, taking into account the contingent a nd
prospective liabilities, wou nd up that company .”

[18] Accordingly, on application of the just and equitable barometer, this Court is
satisfied that it is just and equitable for Muks to be placed under liquidation.

The jurisdictional requirement to apply to Court

4 (2024 -012285) [2024] ZAGPPHC 490 (30 May 2024)

[19] There was a debate before this Court that since the BRP failed to investigate
the affairs of Muks, he should be removed and shall not be in a position to
approach this Court under section 141(2) of the CA. Ther e is no merit in that
debate . The jurisdictional requirements of the section are ( a) a conclusion by
the BRP that (i) no reasonable prospect of rescue exists; (ii) business rescue
must discontinue. A conclusion arises after an assessment of facts . Conclusion
simply means the end or finish of an event or a process. Th e conclusion that
there is no reasonable prospects of rescue is solely that of the BRP . It ought to
be accepted that the BRP is a member in good standing of a legal, accounting
or business management profession and he is accredited by the CPIC. The
discontinuation of the business rescue proceedings axiomatically happens
when the BRP concludes that no reasonable prospects of rescue exists. It is for
those reasons that section 141(2)(b)(ii) of the CA provides that if there are
reasonable grounds t o believe that the company is no longer in financial
distress , the business rescue proceedings may terminate by notice. Regard
been had to the standing of the BRP, it is befitting for him to make the
conclusions alluded to above. A member of a company und er business rescue
has no legal standing to make the conclusions. Equally, a member lacks a
standing to conclude that a company under business rescue is no longer
financially distress ed. Without necessarily deciding the issue of the setting
aside of the re solution of October 2023, this Court takes a preliminary view that
Mr Mulaudzi fails to meet the higher threshold set in section 130(2) of the CA.
En passan t, this Court states that the belated advice by counsel is nothing but
legal machination. Even if, f or some weird reasons , this Court accept that the
rental liability was false and misleading, the resolution of October 2023 was
perspicuously predicated on a variety of reasons.

[20] Accordingly, in my view, the jurisdictional requirements to launch the liquida tion
application exists. This Court is satisfied that the conclusion to apply for
liquidation is the correct one.

The counter application

[21] Since this Court is minded to place Muks under liquidation, the prayers in the
counter application will be come moot and academic. In terms of section
132(2)(a)(ii) of the CA , once a Court has converted the proceedings to
liquidation proceedings, as this Court is of that mind, business rescue
proceedings end. This Court has taken a view to entertain the liquidation
application first, thus the business rescue proceedings must end. The ending
thereof spells the end of the role of the BRP and the resolution to begin
business rescue proceedings becomes ineffective in law. Thus, the counter
application stands to be dismis sed. This Court holds a view that applications to
set aside a resolution and the removal of a BRP must of necessity precede the
application contemplated in section 141(2) of the CA. To my mind, the counter
application ought to have been withdrawn or not la unched in the face of an
application for termination of the business rescue proceedings and an
application to place Muks on liquidation . To this Court’s mind a challenge to a
resolution contemplated in section 129 must be mounted before a BRP is
appointed. Once a BRP is appointed , water sails quietly under the breach. The
proverbial horse would have bolted. This is particularly the case if the
provisions of section 129(3) of the CA are appro priately considered. It would be
foolhardy for a sole member like M r Mulaudzi to within 5 days take another
resolution to appoint a practitioner in the circumstances where he may have
acted on false and misleading information. In the counter application no order is
sought to set aside the two resolutions to appoint the BR Ps.

[22] On account of all the above reasons, I make the following order :

Order

1. The draft order marked X and annexed to this judgment is hereby
made an order of this Court.


____________________________
GN MOSHOANA
JUDGE OF THE HIGH COURT
GAUTENG DIVISION, PRETORIA


APPEARANCES:

As per the annexed draft order marked X.

Date of the hearing: 29 April 2025
Date of judgment : 05 May 2025