Schipper v Tirisano Property Group (Pty) Ltd and Others

Tirisano Property Group, a property-owning company, was financially distressed with substantial arrears, including R11.156 million owed to Emalahleni Local Municipality for municipal charges and R239.5 million to Courthiel Holdings under mortgage bonds. Emalahleni launched winding-up proceedings. Aquarella also sought winding-up based on sale agreement claims. Tirisano's director and shareholder, Mr Schipper, applied for business rescue under section 131(4) of the Companies Act 71 of 2008, proposing either continued solvency (through refinancing or asset sales) or a better return than liquidation. The application was opposed by Emalahleni, Courthiel, and Aquarella, who argued Tirisano had been mismanaged, had no reasonable prospect of rescue, and the application was an abuse of process.

• Whether Tirisano was financially distressed within the meaning of section 131(4) of the Companies Act 71 of 2008.
• Whether there was a reasonable prospect of rescuing the company, either by restoring it to solvency or achieving a better return for creditors than immediate liquidation.
• Whether business rescue was an appropriate remedy given allegations of mismanagement, bad faith, and the company's trading history.

The business rescue application under case number 22983/2023 was dismissed with costs, including costs of two counsel where employed. Tirisano was placed under provisional liquidation in the Emalahleni winding-up application, with a rule nisi returnable on 20 June 2024. The Courthiel intervention, Aquarella winding-up, and Aquarella intervention applications were postponed pending the return day.

For a court to place a company into business rescue under section 131(4) of the Companies Act 71 of 2008, the applicant must establish a reasonable prospect of rescuing the company, which requires more than speculative suggestions. A reasonable prospect must be based on factual grounds established in the founding papers, not on unsubstantiated hopes. Additionally, even if the statutory requirements are technically met, the court must determine whether business rescue is appropriate in the circumstances, considering factors such as creditor opposition, history of mismanagement, delay, and whether the proposed plan amounts to an informal winding-up.

The court noted the 'notoriously elastic and often highly subjective' nature of asset valuations, quoting Boschpoort Ondernemings (Pty) Ltd v ABSA Bank Ltd. It also observed that Tirisano's directors had a duty under section 129(7) to notify creditors of financial distress and the reasons for not initiating business rescue, which they failed to do during 2020 when the company was clearly a candidate for such proceedings.

The judgment reinforces the evidential burden on applicants seeking business rescue, illustrating that mere speculation or unsubstantiated hopes cannot satisfy the 'reasonable prospect' test. It affirms the principles in Oakdene Square Properties and demonstrates that a history of mismanagement, reckless trading, and delay can render business rescue inappropriate, even where a company is financially distressed. The court emphasized that liquidation powers, including investigative capacity, may be preferred where directorial conduct warrants scrutiny.