News
September 25, 2026
Business rescue affords a financially distressed company a measure of protection from legal proceedings while efforts are made to restructure its affairs. The extent of that protection becomes particularly significant where the company retains possession of assets belonging to a financier, landlord or supplier after the agreement permitting their use has been cancelled.
In Capitec v Ubuntu Family Health Centre Grayston (Pty) Ltd (328/2025) [2026] ZASCA 123, handed down on 23 September 2026, the Supreme Court of Appeal considered whether the moratorium under section 133 of the Companies Act 71 of 2008 prevented a bank from recovering a vehicle in these circumstances. The Court confirmed that a company cannot rely on the moratorium to resist proceedings for the return of another party’s property once its right to possession has been validly terminated.
The dispute arose from an instalment sale agreement under which Capitec financed Ubuntu’s purchase of a Porsche 911 Carrera S. Ownership of the vehicle remained vested in Capitec until Ubuntu had paid all amounts due under the agreement. Ubuntu was entitled to possess the vehicle in terms of the agreement but had not acquired ownership.
Following Ubuntu’s failure to meet its payment obligations, Capitec demanded payment of the arrears and subsequently cancelled the agreement on 17 November 2023. Attempts to secure a settlement and obtain access to the vehicle were unsuccessful. Ubuntu adopted a resolution to commence business rescue proceedings on 29 November 2023, shortly before Capitec approached the High Court for an order directing the vehicle’s return.
Although the validity of the cancellation was undisputed, the High Court dismissed Capitec’s application. It held that Ubuntu remained in lawful possession of the vehicle for purposes of section 133 and was therefore protected by the moratorium.
Section 133 generally prohibits the commencement or continuation of legal proceedings against a company in business rescue, including proceedings relating to property belonging to it or lawfully in its possession. Subject to the statutory exceptions, a party seeking to proceed must obtain the business rescue practitioner’s written consent or leave of the court.
The reference to lawful possession extends the protection to certain assets owned by third parties. A vehicle financed under an instalment sale agreement, equipment made available under a lease, or premises occupied under a valid lease can fall within that protection. Establishing ownership is therefore only part of the enquiry. The company’s legal entitlement to retain possession must also be considered.
The High Court interpreted this entitlement in a manner that required criminal unlawfulness before possession would fall outside the moratorium. On its reasoning, possession would be unlawful where property had been acquired through theft, fraud, robbery or similar conduct. The loss of a contractual right to possession was insufficient.
The SCA rejected that interpretation. Property may have been acquired legitimately, yet be retained unlawfully after the agreement authorising its possession has been validly cancelled. An owner seeking its return does not have to establish that the company committed a criminal offence.
In reaching this conclusion, the Court applied established authority, including its earlier decision in Timasani (Pty) Ltd (in business rescue) v Afrimat Iron Ore (Pty) Ltd. That decision recognised that the purpose of business rescue does not warrant protecting a company against proceedings to recover property which it neither owns nor lawfully possesses.
The wording of section 134(1)(c) supports this interpretation. That provision restricts the exercise of rights over property in a company’s lawful possession during business rescue, irrespective of ownership. Its protection similarly depends on the company having a lawful basis for retaining the property.
The SCA also referred to Cloete Murray v FirstRand Bank Ltd t/a Wesbank, in which it had held that cancellation of an agreement does not itself constitute legal proceedings or enforcement action under section 133. The moratorium accordingly does not, by itself, prevent a contracting party from exercising a valid right of cancellation. The contractual and legal requirements for cancellation must nevertheless be satisfied.
In the present matter, Capitec had validly cancelled the agreement before business rescue commenced. Ubuntu consequently had no continuing right to possess the Porsche, and Capitec was entitled to institute vindicatory proceedings to recover it. These are proceedings through which an owner seeks the return of its property from a party without a lawful entitlement to retain it.
The practitioner’s consent was not required for Capitec’s application, nor was it necessary to join the practitioner as a party. The SCA upheld the appeal with costs and ordered Ubuntu to return the vehicle.
For financiers, lessors and other property owners, the judgment reinforces the importance of establishing the contractual position before taking steps to recover an asset. Default, cancellation and the commencement of business rescue are distinct events with different legal consequences. The agreement, notices and chronology must establish that the company’s right to possession has ended. Where cancellation is disputed, that dispute will require determination.
The distinction also affects the relief sought. Recovery of an owner’s property following valid cancellation raises a different enquiry from a claim for outstanding payments or damages. The judgment should therefore be applied to the particular property and proceedings concerned, rather than treated as a general exemption from the business rescue moratorium.
Business rescue practitioners must likewise assess the basis on which a company retains assets belonging to third parties. An asset’s importance to continued operations does not establish a legal entitlement to possess it. That entitlement must be considered when assessing the resources available to support a proposed rescue.
The judgment confirms that the protection afforded by business rescue has defined limits. Where valid cancellation has brought a company’s right to possession to an end, section 133 does not prevent the owner from approaching a court for the property’s return.
Barnard’s Corporate Disputes & Insolvency team advises property owners, financiers and business rescue practitioners on contractual rights, asset recovery and the application of the business rescue moratorium.
