Business Rescue

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WHAT IS THE PURPOSE OF THE BUSINESS RESCUE PROCEDURE?

Business Rescue aims to do exactly what the name says; to rescue or rehabilitate a Company which is under financial duress. A rescue plan must be drawn up by the Business Rescue Practitioner (in consultation with certain parties), which must be implemented in an attempt to save the Company.

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Are Directors under obligation to put the company under rescue, or is it a choice under the New Companies Act!

If the board of directors of a company has reasonable grounds to believe that the company is financially distressed, they must either;

  • Put the company under business rescue, or;
  • Deliver a written notice to all shareholders, creditors, employees and trade unions, that the company is financially distressed, and give reasons why the company is not put under Rescue

Who May apply to court for a Business Rescue Order?

The following applicants can apply:

  • Directors
  • Shareholders
  • Employees
  • Trade Unions on behalf of their members

On what grounds will the Court grant the Rescue order?

  • There is it that the company is financially distressed
  • There reasonable prospects of saving the company
  • Procedural requirements were not complied with
  • If the court deems it “Just and Equitable” that the order be granted.

What is the effect on Legal Proceedings during the Business Rescue Process?

During the Rescue Proceedings, there is a general moratorium on legal proceedings against the company. Because this moratorium might prejudice the companies legal opponents, the prescribed time periods allowed in the process, are also suspended for the same period that the matter was postponed by the moratorium. There are a few exceptions however.

Legal proceedings may continue or commence in the following instances:

  • If written consent is given by the BRP;
  • When the court has so ordered;
  • As a set-off in legal proceedings by the company
  • Proceedings of any property or right which the company holds as trustee
  • Criminal proceedings against the company, its directors or officers are unaffected
  • A guarantee or surety by the company is unenforced without leave from the court

Can an application For Business Rescue be made after legal proceedings for the liquidation of the company has started?

Yes – irrespective if to Application was made by or against the Company. The application for Business rescue suspends the Liquidation Application until the court gave a discussion. Should the Rescue Order be granted then the application for liquidation cannot go ahead. Should the order not be granted, the liquidation application goes ahead.

Frequently Asked Questions

  • What is the Purpose of The Business Rescue Procedure?

    Business Rescue aims to do exactly what the name says; to rescue or rehabilitate a Company which is under financial duress. A rescue plan must be drawn up by the Business Rescue Practitioner (in consultation with certain parties), which must be implemented in an attempt to save the Company.

  • What form does the Business Rescue Plan take?

    Can take many forms, which might include a total or partial restructure of the companies’ Affairs, Property, Business, Shares & shareholding, Debt, Operation and Equity, to make the company commercially viable, and to try and create a better result for the creditors and shareholders than an immediate liquidation would bring.

  • Who May apply to court for a Business Rescue Order?
    • Directors
    • Shareholders
    • Employees
    • Trade Unions on behalf of their members
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