A liberal interpretation of section 131 of the Companies act 71 of 2008 in light of Richter v ABSA.
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Business rescue is a corporate rescue system in South African law that has replaced judicial management. An applicant in a business rescue application in terms of section 131 of the Companies Act 71 of 2008 has to satisfy the court that there is a ‘reasonable prospect of success.’ This term has existed in South African law before the enactment of the Companies Act 71 of 2008 but judicial attention in giving effect to this term has been centered around judicial managements failure. This study recognizes that judicial management is a failure and proposes a new approach that is completely divested from judicial management. The first part of the study examines the way in which the judiciary has approached interpreting ‘reasonable prospects’ by critically analyzing the sources the courts have used and conclusions reached. The study breaks down the judiciaries attitude and approaches to 3 different cases which are classified as first, second and third generation cases. The study argues that if business rescue is to be successful then the Companies Act 71 of 2008 should be amended or a new fourth generation of cases need to adopt a liberal approach to ‘reasonable prospects’ by considering the previous jurisprudence on this term as well as relying on the procedural safeguards in Companies Act 71 of 2008.