Post commencement finance : jumping the ranking queue : a critical analysis of Merchant West Working Capital Solutions v Advanced Technologies and Engineering Company Ltd and the order of preference in business rescue

LL.M. (Commercial Law)One of the major themes of the Companies Act 2008 is the creation of a corporate rescue regime which suitable for the modern South African economy. One of the most crucial components of a successful business rescue procedure is securing post-commencement finance. In any rescue regime funding is needed to enable the company to meet its short term obligations and cover restructuring costs. Without funding businesses cannot continue their business operations and therefore the entire purpose of business rescue is frustrated. The inability to secure postcommencement finance has resulted in many failed corporate rescues. Preference may be accorded in order to attempt to entice lenders to provide finding to financially distressed companies. Difficulty arises with regard to the competing interests of secured existing creditors and post-commencement finance lenders. The recent judgement of Merchant West Working Capital Solutions v Advanced Technologies and Engineering Company Ltd & Another sought to provide clarity on the order of preference in business rescue. This dissertation seeks to analyse this judgement in detail having regard to the United States of America’s Chapter 11 as well as international law publications