On 30 June 2025, the Supreme Court of Appeal (“the SCA”) provided clarity on the limits of directors’ powers during business rescue in Knoop and Others v Tegeta Exploration and Resources (Pty) Ltd and Others [2025] ZASCA 96. The case concerned whether or not a director of a company under business rescue has the authority to appoint attorneys to act on behalf of the company without the authority of the business rescue practitioners (“the BRPs”).
Factual Background
The first and second appellants were the BRPs of several connected companies, including Tegeta and Koornfontein Mines (“the companies”). Acting in their capacity as directors of the companies, Ms Ronica Ragavan and Mr Archery instituted proceedings in the Gauteng Division of the High Court, seeking the removal of the appointed BRPs, citing dissatisfaction with the manner in which the business rescue process was being conducted. They did so by instructing attorneys, Van der Merwe and Van der Merwe (“the attorneys”), to act on behalf of the companies. However, the BRPs had not authorised this appointment. Despite this, the High Court held that the attorneys were authorised to act for one the companies, Koornfontein. The SCA took a different view.
The Crux
At the heart of the appeal was a simple but important question: does a director of a company under business rescue have the authority to appoint attorneys to act on behalf of the company without the approval of the appointed BRPs. The SCA’s answer was a clear no. The SCA confirmed that, while section 66 of the Companies Act ordinarily vests the board of directors with full management authority of a company, it is not without limitations. The appointment of BRPs constitutes such an exception. In terms of section 137(2), directors are required to continue performing their functions during the business rescue, but only under the direction or with the approval of the BRPs. The SCA further held that while section 139(3) allows directors to appoint a new business rescue practitioner in voluntary business rescue proceedings, this power does not extend to instances where business rescue was initiated involuntarily. As such, the general powers of directors under section 66 are restricted by the provisions of section 139(2).
Business Rescue: A Statutory Scheme, Not a Mere Restructuring Exercise
The SCA took this opportunity to emphasise the purpose of business rescue which is to facilitate the rehabilitation of a financially distressed company through an independent practitioner led process. The BRPs are not just advisors, they are in charge of the management of a company for the duration of the business rescue process. Directors do not lose their titles, but their ability to act on behalf of the company becomes tightly regulated.
