Labour Law News South Africa

Can you challenge a dismissal when the company is in business rescue?

Facing dismissal after years of service can be tough, but what happens when the company goes into business rescue before you can challenge the decision?
Image source: tashatuvango –
Image source: tashatuvango – 123RF.com

The Companies Act 71 of 2008 places a moratorium on legal proceedings against companies undergoing business rescue. In terms thereof, no legal proceeding may be commenced or proceeded within any forum against a company which has entered into business rescue proceedings, except amongst other exceptions, with the written consent of the business rescue practitioner, or leave of the court. Without the necessary consent or leave, a party must await the conclusion of the business rescue proceedings before it may institute legal action.

Freeze frame

Notably, the moratorium also freezes all time frames which must be complied with when seeking relief.

In labour disputes, no legal action may be taken against an employer who is undergoing business rescue in any forum, be it a bargaining council, the CCMA, or the Labour Courts, without the business rescue practitioner’s written consent or leave of the court.

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Once the employer has entered into business rescue proceedings, a new dispute can be referred to the bargaining councils or the CCMA; however, it cannot be set down for conciliation and/or arbitration until such time that the business rescue proceedings have been concluded.

The moratorium similarly freezes any prescribed time frames within which referrals must be made to the CCMA, which means that the time falling within the duration of the business rescue proceedings will not be counted for purposes of ascertaining the jurisdiction of the bargaining council or CCMA.

Updates

In instances where the business rescue proceedings have not been finalised within three months of commencement, the appointed business rescue practitioner must publish monthly updates. It is imperative to keep up to date with these to ensure that the necessary action is taken as soon as permissible.

The inevitable consequence is that, in the absence of obtaining consent from the business rescue practitioner to proceed with legal action, it can be a protracted and expensive exercise to apply to court to obtain leave to proceed with legal action.

Apart from having various negative ramifications on unfairly dismissed employees, this on its own is not in accordance with the spirit of the Labour Relations Act 66 of 1995 which requires the speedy and efficient resolution of labour disputes.

About Lesley Mokgoro and Odirile Matladi

Lesley Mokgoro: CEO and Director of the Dispute Resolution Practice Group, and Odirile Matladi: Candidate Legal Practitioner in the Dispute Resolution Practice Group at PH Attorneys
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