BUSINESS RESCUE

Business Rescue

The court in Richter v Absa Bank Limited (20181/2014) [2015] ZASCA 100 held that the purpose of business rescue is “to provide for efficient rescue and recovery of financially distressed companies in a manner that balances the rights and interests of all relevant stakeholders.”. Business rescue proceedings are aimed at preventing the societal and financial harm caused by liquidation proceedings. Section 128(1)(b)(ii) contemplates two further goals of business rescue proceedings, which is to facilitate the continued existence of the company in a state of insolvency and, a secondary goal, which is to facilitate a better return for the creditors or shareholders of the company than would result from immediate liquidation.

Who can apply?

VOLUNTARY:

The board of directors may pass a resolution to place the company under voluntary supervision and in business rescue proceedings.

COURT:

Any creditor, employee, trade union or shareholder of a company can apply to the honourable court to place the company under supervision and in business rescue in terms of Chapter 6 of the Companies Act, 2008..

THE PROCESS:

Once a company is under supervision and in business rescue, a registered business rescue practitioner will be appointed. The business rescue practitioner will take control over the company in replacement of the board. The business rescue practitioner is tasked to implement a business rescue plan which will assist in restructuring the affairs of the company to financial health.