Business Rescue Law
We assist businesses in all areas of Business Rescue Law
- Robyn Hey
Laws and Regulations
What to expect when entering into Business Rescue
The most important thing to note about the implementation of business rescue is that the directors of the company in business rescue cease to have ultimate control of the affairs of the company. A business rescue practitioner will be appointed, who will have the final say on how the business is run during the period that business rescue is in place (subject to a business rescue plan). The process of business rescue involves a period during which the business rescue practitioner comes to grips with the business and makes a determination of whether the distressed business can be saved, i.e. returned to a state of solvency). The business rescue practitioner will accept claims from creditors and liaise with them to draft a business rescue plan which, if approved by creditors, will be implemented. While the company is in business rescue, creditors may not bring any legal action against the company.
Alternatives to Business Rescue
If the company is not yet in a position where it can be defined as distressed, an informal turnaround process can be put in place. However, this does not give rise to a moratorium in respect of creditors’ claims and needs to be carefully implemented to ensure that the directors of the company in question do not fall into the trap of trading recklessly. One of the tools available to the company, if it is not in business rescue, is a statutory compromise between the company and its creditors in which a proposal is put to creditors which details the suggested treatment of the debts of the company in terms of such a proposal. The purpose is essentially to show creditors that by accepting the proposal, they would be better off than if the company were to be placed in business rescue or in liquidation (where it is not already in liquidation). Where a company is simply insolvent and cannot carry on trading or where continuing to trade would be reckless, liquidation is the only option available.
Whatever the type of contract, an attorney needs to approach it clearly and commercially in order to manage their client’s risk and achieve the best result.
- Sarah van Zyl, Caveat Panel Member
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