Confidentiality of a Business Rescue Plan

16 Apr 2021 By Pat Pattinson



Confidentiality of a Business Rescue Plan

I recently added poll to LinkedIn, and I thought I would follow up with an article for further debate.

The poll question was:

“Is a Business Rescue Plan a confidential document or should we be allowed to freely share it between affected persons & interested parties?”

The options:

  • It should be confidential (27%)
  • It should be Public (73%)

As echoed by @TiaanHerbst from EBR Consultants’ in the comments to the poll,

None of the above: it is a public document”, the results are clearly favouring the belief that a business rescue plan should be a public document.

We then have a very different comment from @DawievanderMerwe,

I have to fundamentally disagree. A BR Plan can never be a "public document". A proper BR Plan will contain information that is proprietary to the company. It's suppliers, it's financial information, it's assets and the value of those assets, gearing and cost of finance and even its projected income for the coming years.”

Now if all of this is in the public domain each and every competitor will have access to that information. Need I say more.”

When I saw this on the post, I must admit that Mr Van der Merwe had some very valid points.

At the same time, how can a business rescue plan be kept confidential - affected persons need to share its contents with their attorneys, accountants, mentors or other consultants. In addition to creditors, a business rescue plans must be shared with all staff of the company, who will surely share this business rescue plan with their legal and other representatives for advice.

In response to the post from Mr Van der Merwe a follow up post came from @CaitlinGottschalk

I think the sensitivity of the information disclosed is an important issue to highlight, even more so in light of POPI.

That being said, most of the information detailed above is ordinarily disclosed in Court papers surrounding a rescue. These documents are public.”

It is perhaps admirable to think that business rescue proceedings are not supposed to end up in court, but at the same time I would rather prepare a business rescue plan as if it will end up in court as a public document rather than simply hoping that it won’t.

The question must also be considered as to why the veil of confidentiality should be afforded to a business rescue plan except if it is brought in front of a court.

I would like to say thanks to all the contributions and look forward to your comments on this article.

If we were to look at the legal definition of an affected person as stated in Section 129 (a) - it does not include any mention of legal, accounting or any other form of advisors.

If we were to stick to the letter of the law here, no affected person as stated in this section would be allowed to share this business rescue plan with their attorney or accountants for advice. At the same time if we were to simply consider the reality of the term in the following context, how can we limit the term affected person to this section of the act.

A breadwinner may be retrenched as a result of a proposed business rescue plan, how can we say that his spouse, family and or dependents are not affected, how can we say that this breadwinner, who might never before have even heard of business rescue, is not allowed to contact an attorney or mentor. In the same light I will challenge any business rescue practitioner to tell me about a business rescue where he did not willingly interact with a creditors attorney or accountant. Based on this we can accept that the term affected persons is not limited to those indicated in Section 129(a).

@CaitlinGottschalk then makes a very valid point in so far as business rescue application done in terms of Section 131 of the Companies Act would be, by its very nature, a public document. At the same time even if it was a voluntary application in terms of Section 129 of the Companies Act we must consider the following scenarios:

  1. Section 130 (1) of the Companies Act where an affected person may apply to court to:
  • Set aside the resolution to begin Business rescue
  • Setting aside the appointment of the practitioner
  • Requiring the practitioner to provide security
  1. Section 133 where an affected person may approach the court for consent to take legal actions against an entity in business rescue.
  2. Section 139 where an affected person may apply to the court for the removal of a practitioner.
  3. Section 153 where an affected person or the practitioner may approach the court to have a vote on a plan set aside
  4. Section 155 where a practitioner may approach the court to have a compromise approved and or sanctioned.

It is thus clear from the limited examples above that a plethora of actions could result in a business rescue process and ultimately the business rescue plan ending up in the hands of the court, making it an undeniably public document.

It is known that some practitioners add into their proposed business rescue plan, a clause of confidentiality, insisting that the document is confidential and that no one may circulate and or distribute such a plan. I have some concerns about this:

It is my understanding that such a clause can only be considered if it conforms to the very basics of contract law, a practitioner cannot simply give instruction.

There has to be an offer made and that offer accepted (not just an instruction), there has to be an agreement (meeting of the minds), what is of further concern is that this “confidentiality clause is normally towards the end of an agreement thus not providing an opportunity not to agree (negative option marketing). In addition is normally in these same plans that the practitioner ads a disclaimer advising affected persons to seek advice.

In short I do not believe such a clause could hold any value and is merely a tacit attempt by some practitioners to protect themselves.

I do of course understand the irony of a binding business rescue plan once it is adopted and that such a plan could then be considered an agreement containing the basic conditions of a contract, but until it is adopted it is not binding and even once adopted could be considered a supervening impossibility.

In short, I believe a Proposed business rescue plan should at all times be considered a public document and it is up to the practitioner not to disclose any information that could be harmful to the business as he must act not just in terms of a director of a business he is acting for, but also as an officer of the court.

This is then further complicated by Section 150 (2) of the Companies act that states;

“A business rescue plan must contain all the information reasonably required to facilitate affected persons in deciding whether or not to accept or reject the plan,”

 The real topic for debate may then be what information must be in a proposed business rescue plan, and to what extend this information must be elaborated on.

This is ultimately the purpose for these debate topics, although we may not get a conclusion it gets us all thinking, and should we create a strong enough opinion, it might become the accepted norm in the industry before it is necessary to resort to the courts.



The views and opinions expressed in this article belong solely to the author and are not in connection with or associated with his business, organisation, committee, association or other group or individual. The contents of this article are for informational purposes only and are not intended to be legally binding or constitute advice in any manner whatsoever and is provided without prejudice.

BUSINESS RESCUE and Confidentiality of a Business Rescue Plan