Reasons why Businesses Fail

Q: When is a company financially distressed?

A:  The definition according to the Companies Act : financially distressed, in reference to a particular company at any particular time, means that—

(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

Q: How do I know if our company needs rescue?

A: You need to look at key financial indicators such as the following:

If you answer No to most of the following questions, chance are you may need to at least contact a consultant to do a financial assessment:

  • Do you struggle constantly with cash flow?
  • Can you pay your suppliers on time?
  • Do you collect money from customers on time?

 

Q: Can we rescue the business without all the legal stuff?

A: Yes, If you act on time and see the warning signs of a struggling business early we may be able to assist you with developing strategy without having to go through all the legal processes. Commonly referred to as Turnaround Management Strategies.

Q: Can the company put itself through Business Rescue?

A:  Yes, by doing a Company Resolution the company may start the Business Rescue Process but it may be contested by any of the affected parties which in some circumstance may stop the business rescue process.

Q: I am an affected person of a company that seems to be unable to pay me on time. What can I do?

A: As an affected person you can apply to court to put a business through the Business Rescue process.  This will not get you your money instantly but may in some case be the best possible way of eventually getting your money once the business rescue proved to be successful.

Q: Will business rescue always work?

A:  No there is no guarantees that Business Rescue will save all businesses.  There are too many variables that need to be looked at which will differ from company to company that may make a business rescue unsuccessful.