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Such resolution must be filed with the Commission before it is of any force or effect, and
may not be adopted if liquidation proceedings have already been initiated against the
company.
If a company is financially distressed and directors decide not to place it into business
rescue, the directors will be under a statutory obligation to deliver a written notice to
each affected person, confirming that the company is financially distressed and is not
being placed into business rescue and providing reasons for this.
The Amendment Act amends Sections 135 and 145 by stating that any amounts due
by a company under business rescue to a landlord for rent or services will be regarded
as “post commencement financing” and the landlord will have a voting interest in the
business rescue proceedings to the extent of its claim. Post commencement finance,
whether secured or unsecured, enjoys preference over unsecured creditors.

The ‘Business Rescue’ clause in the Companies Act 71 of 2008, also applies to CC’s.

DEFENCES AND RELIEF FOR DIRECTORS

Ignorance of the law is no excuse, and will not hold up as a defence for directors.
The Business Judgement Rule
Sections 76(4)(b) and 76(5): The Business Judgement Rule is regarded as the main
form of protection for directors. It is based on the idea that a director who has relied on
the professional opinions of accountants, attorneys, and other business advisors that
influenced their business decisions (and which turned out not to be in the best interests
of the Company), may raise this as a defence against liability. In other words, he will not
be held liable for bad outcomes as long as such decisions were made in good faith, with
due diligence and on an informed basis, and which the director thought were in the best
interests of the company.
In theory, directors should be held liable for decisions which have an adverse effect on
a company. However, certain situations may arise where a director would be unfairly
prejudiced by the provisions of ‘Standards of Directors’ Conduct’.
The business judgement rule can only be used if all of the requirements of the Act are
met. Where a director ignores relevant information or advice given to him and conducts
business in bad faith, the business judgment rule will not apply. This defence is not
available to members of CC’s.
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