Business Rescue
Information

Business Rescue in the South African context only became applicable with the introduction of the latest version of the Companies Act.

One of the substantial changes in the latest amendments to the Companies Act was the provision for Business Rescue proceedings that was introduced to replace the Judicial Management procedures of the previous Companies Act. This change has brought about a whole new field that according to the latest companies act MUST be explored before a company can stop its operations due to poor financial performance.

Business Rescue is not meant to save all businesses. However when a business has a good business model that can be saved, Business Rescue provides means by which some relief can be negotiated with creditors and affected parties in order to give the business the best possible change of survival.

The mechanism is intended to deal with businesses that are financially distresses which by definition in the Act mean:

(i) it appears to be reasonably unlikely that the company will be able to pay all of its debts as they become due and payable within the immediately ensuing six months; or

(ii) it appears to be reasonably likely that the company will become insolvent within the immediately ensuing six months;

Business Rescue by definition is therefore:

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 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 than would result from the immediate liquidation of the company;

The current resources available can be obtained from CPIC  or the dti. For your convenience we have the resources available as at 2011-06-30. (The Chapter 6 extract specifically deals with Business Rescue). View at the bottom.