Personal liability of Business Rescue Practitioners in South Africa

Business Rescue Practitioners (“BRPs”) occupy a significant position under Chapter 6 of the Companies Act 71 of 2008, as they assume management control of financially distressed companies with the aim of facilitating rehabilitation and avoiding liquidation. Because BRPs exercise extensive powers over the affairs and assets of a company, South African law recognises that they may, in certain circumstances, incur personal liability for their conduct during business rescue proceedings.

Section 140(3)(c)(ii) of the Companies Act provides that a BRP may be held liable for any act or omission amounting to gross negligence in the performance of their duties. In addition, courts may impose personal liability where a practitioner acts recklessly, fraudulently, in bad faith, or abuses the business rescue process. This includes situations where a BRP fails to act independently, improperly favours certain creditors, misuses company funds, or continues rescue proceedings where there is clearly no reasonable prospect of rescuing the company.

The recent decision in Africa Agriculture and Trade Investment Fund v Vienings is now one of the leading authorities on the personal liability of BRPs. In this matter, creditors sought to hold the business rescue practitioner personally liable for debts, alleging that he acted recklessly by continuing business rescue proceedings and utilising company funds to procure guarantees despite the eventual failure of the rescue process.

The Supreme Court of Appeal rejected the claim and held that the practitioner’s conduct did not constitute gross negligence or recklessness. The Court emphasised that business rescue proceedings are inherently commercial and involve difficult decisions taken in distressed circumstances. Importantly, the Court warned against assessing the conduct of BRPs with the benefit of hindsight merely because the rescue ultimately failed. The Court found that, at the relevant time, there were still genuine prospects of rescuing the company, and the practitioner had acted in pursuit of those objectives rather than for an improper purpose.

The judgment confirms that BRPs are not insurers against commercial failure and will not automatically incur personal liability simply because a rescue attempt proves unsuccessful. However, the case also reinforces that practitioners remain accountable where their conduct falls far below the standard expected of a reasonable and competent BRP.

Accordingly, South African courts continue to strike a balance between protecting BRPs who act bona fide in difficult commercial environments and ensuring accountability where practitioners act dishonestly, recklessly, or with gross negligence.