Judicial management is provided for as an alternative to winding up in terms of Sections 299 – 314 of the Companies Act (Chapter 24:03). What is judicial management? The term is not defined in the Companies Act. However, what can be deduced from the various provisions of the Companies Act is that the concept means the management of a company by a person appointed by the Master of the High Court in terms of the provisions of the Companies Act, subject to the supervision of the High Court.

Nomination of judicial manager

In the application, the applicant has to nominate a judicial manager. The nominee must be a public accountant who is not the auditor of the company. However, the Court has the right to reject the applicant’s nomination and appoint another person, who may not necessarily be a public accountant, as judicial manager instead. The Minister for Finance may also nominate a person to act as the company’s judicial manager if the Minister thinks this is necessary in the public interest.

Court Order for Judicial Management The Court may make an order for judicial management if:

• It is satisfied that the company is or is likely to become unable to pay its debts; and
• It considers that placing the company under judicial management would be likely to achieve at least one of the following purposes:
  1. The company’s survival, or its undertaking as a going concern (whether in whole or in part);
  2. The approval of a scheme of arrangement; or
  3. The more effective use of the company’s assets to satisfy creditors’ claims, compared to if the company was wound up.

However even if these requirements have been satisfied, the Court can still refuse to grant the order if it thinks this is necessary. In exercising its discretion, the Court may consider factors such as:

• Creditors’ interests;
• Creditors’ opposition to the granting of a judicial management order;
• Likelihood of the company’s successful rehabilitation; and/or
• Suitability of judicial management against other regimes, such as winding up.

Finally, there is one situation where the Court must dismiss an application for a judicial management order. This is when:

• A floating charge holder opposes the making of the order; and
• The court is satisfied that the prejudice caused to the floating charge holder if the order was granted would disproportionately outweigh the prejudice caused to the company’s unsecured creditors if the application for judicial management was dismissed.