South African Company Law – Guarantees, undertakings sureties and business rescue

south african company lawBusiness rescue proceedings is a new concept introduced to South African company law by Chapter 6 of the Companies Act 71 of 2008, as amended.


Guarantees and undertakings on the other hand, are a well-known concept in South African law, including common law.


It then follows, what is the distinction between a guarantee and undertaking?


A simple search on Google describes the guarantee as follows:

 “a formal promise or assurance (typically in writing) that certain conditions will be fulfilled… e.g. that a product will be repaired or replaced if not of a specified quality and durability.”

“a formal pledge to perform another person’s obligation in the case of default.”

Guarantees are often also referred to as warranties.

It follows that a guarantee is a legal term more comprehensive and of higher importance than either warranty or “security”.


An undertaking on the other hand – is: a “formal pledge or promise to do something.”


So, what do guarantees and undertakings have to do with business rescue proceedings? In order to address this – we need to consider the relationship between or existing precedent in regards to sureties.

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