African Banking Corporation of Botswana Ltd v Kariba Furniture Manufacturers (Pty) Ltd and Others

Kariba Furniture Manufacturers (Pty) Ltd, controlled by its shareholders and directors Mr and Mrs Nchite, was indebted to African Banking Corporation of Botswana Ltd under a credit facility secured by suretyships and a notarial bond. After an arbitration award confirmed Kariba’s substantial indebtedness, the board resolved in January 2012 to commence voluntary business rescue proceedings under the Companies Act 71 of 2008. A business rescue practitioner was appointed. At the second meeting of creditors, the proposed business rescue plan was rejected by the bank, which held 63% of the voting interest. The shareholders then purported to make a “binding offer” under s 153(1)(b)(ii) to purchase the bank’s voting interest. The practitioner ruled that the offer was automatically binding on the bank, excluded the bank’s vote, amended the voting interests, and declared the plan adopted. The bank challenged the validity of the binding offer, the adoption of the rescue plan, and the commencement of business rescue proceedings.

The appeal succeeded. The purported binding offer was declared not binding on the bank. The approval of the business rescue plan was set aside, as was the resolution to commence voluntary business rescue proceedings. Costs were awarded against the second, third and fourth respondents jointly and severally.

The case provides authoritative guidance on the interpretation of s 153(1)(b)(ii) of the Companies Act, clarifying that a binding offer in business rescue does not deprive an opposing creditor of the right to accept or reject the offer. It also reinforces the requirement that business rescue proceedings must be grounded in realistic prospects of success and not used to delay or frustrate creditors’ rights.