Business Rescue
What is business Rescue?
The purpose of business rescue is to provide breathing space to the company in the form of the moratorium in which the company can restructure its affairs to maximise the possibility of the company’s continued existence on a solvent basis or results in a better return for the creditors than what would have realized through the liquidation process.
Business Rescue is a process entered into by a company or close corporation that is in financial distress.
What does the process involve?
A temporary moratorium on the rights of claimants against the company or in respect of property in its possession.
The temporary supervision of the company and management of all affairs relating to the company.
The development and implementation, if approved of a business rescue plan by restructuring the business, its debts and affairs.
According to Section 129 of the Companies Act 71 2008, a company can be placed into business rescue when the board of directors of a company resolves that the company commence business rescue proceedings under the supervision of a business rescue practitioner. This notice is then filed with the Companies and Intellectual Properties Commission hereinafter referred to as “the Commission” and becomes the date of commencement of business rescue proceedings.
Within five (5) business days from this date, the company must publish a notice of the resolution and its effective date to all affected parties and appoint a qualified business rescue practitioner.
After appointing a business rescue practitioner, the company must file a notice of appointment with the Commission and publish a notice of appointment to all affected parties within five (5) business days after the filing of the appointment.
Within ten (10) business days after being appointed the business rescue practitioner must convene a first meeting of creditors, during this meeting the business rescue practitioner must inform the creditors whether he believes that there is a reasonable prospect of rescue and may also receive proof of claims of creditors.
Within twenty-five (25) business days from the appointment, the business rescue practitioner must publish a business rescue plan unless an extension of this date has been agreed to by creditors.
The creditors will then vote on the business rescue plan at the second meeting of creditors held within ten (10) business days after the publication date. The business rescue plan will be approved on a preliminary basis if the business rescue plan is supported by the holders of more than 75% of creditors voting interest and who voted in favour of the business rescue plan.
The time period involved in business rescue is between 6 and 36 months.
It is to be noted that there is an informal process that can also be followed the negative impact of this procedure is that it does not create a creditors moratorium.