Business Rescue Explained?
WHAT IS BUSINESS RESCUE?
Business Rescue means proceedings to facilitate the rehabilitation of a company that is financially distressed by providing for
i. the temporary supervision of the Company, and of 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 maximizes the likelihood of the Company continuing inexistence on a solvent basis or, if that is not possible;
iv. a plan that would achieve a better return for the Company’s creditors than the payment they would have received if the Company had simply been liquidated immediately.
WHAT IS A BUSINESS RESCUE PRACTITIONER?
A Business Rescue Practitioner is a person appointed, or two or more persons appointed jointly, to oversee a Company during business rescue proceedings. A Practitioner must be suitably qualified (legal, accounting or business background) with no conflict of interest relating to the business (see s.138 of the Act and Regulations 126 and 127);
WHAT IS A BUSINESS RESCUE PLAN?
A Business Rescue Plan is a plan developed and, if approved, implemented by the Business Rescue Practitioner, which details the manner in which the practitioner envisages that the Company will be rescued.
WHEN DOES BUSINESS RESCUE START?
In terms of Section 132 of the new Companies Act, Business rescue proceedings begin when—
a. the company—
i. files a resolution to place itself under supervision in terms of section 129(3); or
ii. applies to the court for consent to file a resolution in terms of section 129(5)(b);
b. an affected person applies to the court for an order placing the company under supervision in terms of section 131(1); or
c. a court makes an order placing a company under supervision during the course of liquidation proceedings, or proceedings to enforce a security interest, as contemplated in section 131(7).
BUSINESS RESCUE PROCEDURE
When a company files for business rescue, it is placed under supervision and control of a business rescue practitioner. The following proceedings will then take place:
Assessment of the company’s financial situation. This is to determine if the company is viable for a successful rescue.
The company formally enters business rescue. Filing of the necessary documents is done with the CIPC. The business rescue practitioner is duly appointed. This stage is crucial and administratively intensive.
An in-depth analysis of the company is done. The business rescue practitioner engages with all interested parties to draft and formulate a business rescue plan. These parties include banks, financial institutions, creditors, suppliers, SARS and employees.
On approval, the business rescue practitioner ensures implementation is done according to the plan.
The business rescue process is formally terminated and the company can continue to operate profitably.