Another state-owned airline placed into business rescue

A couple of months after South African Airways (SAA) was placed into business, another state-owned airline, SA express, was also ordered to begin business rescue by the Johannesburg High Court on 6 February 2020.

This comes after one of its creditors filed an application in terms of section 131(1) of the Companies Act seeking an order placing SA Express under business rescue as well as the appointment of two Business Rescue practitioners as interim practitioners of the airline.

The financial woes of the airline were reported to have allegedly worsened when its sister company, SAA, commenced with business rescue. Although they are two distinct entities, SAA’s current financial state influenced the court’s finding that SA express is financially distressed. The court further stated that a determination whether the airline is terminal ill or if it can be rescued, can only be made after the business rescue practitioners have properly investigated the affairs of the airline in terms of section 141(1).

Within 10 days from the date of judgement, the interim practitioners must convene the first meeting of creditors. In this meeting, creditors will have the opportunity to confirm the current appointment or, the majority of creditors, can appoint an alternative practitioner, if they are unhappy with the appointed interim practitioners. This is imperative as the management of the airline will shift from the board of directors to the appointed business rescue practitioners. Thus, creditors must ensure that the right practitioner is appointed.

According to a statement made by the airline, their legal representatives have been instructed to note an appeal against the judgement. This will have an effect of suspending the business rescue judgement pending the outcome of such appeal. Furthermore, the board of directors will regain its executive powers.

This ruling is important as it shows that state-owned entities are subject to the Companies Act. Furthermore, the court has confirmed its jurisdiction by granting this ruling.

Disclaimer: The contents and information provided above are generalised and must not be acted upon as legal advice