AMJD Volume. 10, Issue 1 (2021)

The automatic statutory moratorium on legal proceedings and enforcement action that endures from commencement to termination of the business rescue process is central to the legislative scheme. This is important for a country which envisages rescuing ailing companies as a priority. The moratorium has, nevertheless, a considerable impact to the affected persons. The company creditors are a leading group among the affected persons which likely to be more affected by this stay on enforcement action. The crux of this study is to discover to what extent this statutory moratorium is of detriment to the creditors rights. The overall analysis of the business rescue proceedings provisions and more specifically Section 131 (1) of the Companies legislation: in conjunction with the available case law that have interpreted the aspect of moratorium were important tools in exploring the magnitude of the vulnerability of creditors rights. The study has learned that the stay on action covers a wider scope for the purpose of achieving the goals necessitated for the mechanism to be established. The statute has, however, not given a full stay against legal proceedings and enforcement rights of creditors. Further, during the execution of the mechanism by the business rescue practitioner, creditors are not barred to approach the court whenever they are of the view that their interests are subject to prejudice. It is, therefore, safe to state that the legislation and court have simultaneously taken cognisance of the rights of creditors and broad policy objectives of business rescue.