Your guide to Business Rescue
Basic Principles of Business Rescue
If your company finds itself in financial distress, the Business Rescue process gives
your company with opportunity to reorganise and restructure its affairs in order to
allow the business to continue trading. This includes payment arrangements with creditors
whilst also saving jobs.
The process is defined by the Companies Act 71 of 2008 as follows:
“…proceedings to facilitate the rehabilitation of a company that is financially distressed providing for –
(i) The temporary supervision of the company, and the management of its affairs, business and property
(ii) A temporary moratorium on the rights of claimants against the company or in respect of property in its possession and
(iii) The development and implementation, if approved, of a plan to rescue the company by restructuring its affairs, business, property, debt and other liabilities, and equity in a manner that maximises the likelihood of the company continuing in existence on a solvent basis or, if it is not possible for the company to so continue in existence, results in a better return for the company’s creditors or shareholders tan would result from the immediate liquidation of the company.”
A company can be placed under Business Rescue either by an affected person applying to the High Court for an Order to commence the process or when the board of directors resolves that the company voluntarily commences the process. An affected person includes shareholders, creditors, employees or a registered trade union representing the company’s employees.
A Business Rescue practitioner will be appointed and, after investigating the affairs of the company, is required to draw up a business rescue plan for consideration and possible adoption. Once same has been approved, the Business Rescue practitioner must implement it and oversee the Business Rescue plan in an attempt to save the company. It is important to note that during these proceedings, the business rescue practitioner has full management control of the company, i.e. a director would continue to exercise the functions of a director, subject to the authority of the Business Rescue practitioner.
During the Business Rescue process, no legal proceedings, including enforcement action, against the company, or in relation to any property belonging to the company, or lawfully in its possession, may be commenced or proceeded with in any forum therefore prescription will be interrupted during these proceedings.
There are instances where one would be able to commence with legal proceedings namely:
With the written consent of the practitioner
With the leave of the court
As a set-off against any claim made by the company in any legal proceedings, irrespective as to whether those proceedings commenced before or after the business rescue proceedings began
Criminal proceedings against the company or any of its directors or officers
Proceedings concerning any property or right over which the company exercises the powers of a trustee
Proceedings by a regulatory authority in the execution of its duties after written notification to the business rescue practitioner
The Process to Business Rescue...
Make sure you read the article " Things you need to know about Business Rescue that your Lawyer will never tell you."
Irrespective of which direction you are leaning towards to schedule a Free Zoom Consultation of 30 mins where we will walk you through your various options. Be it Liquidation, Business Rescue, a soft Business Rescue or a Business process improvement program.
We will also ask you to complete our information fact sheet and populate same before you join the meeting. It will help us get to the gist of your challenges and help us to formulate an action plan quickly.