FAQ’S

Business Rescue means proceedings to facilitate the rehabilitation of a company that is financially distressed.

The process includes the temporary supervision of the company and all its affairs by a Business Rescue Practitioner, who assumes all the authority of the board of directors for the duration of the process. It also brings with it a temporary moratorium on the rights of the claimants against the company.

It culminates in the adoption or rejection of a business rescue plan by the creditors of the company. Once a plan is accepted and implemented, the company will be taken out of business rescue and go back to normal

If the plan is rejected, in most cases the company will be put into liquidation almost immediately.

The rescue practitioner has almost unlimited power. His power supersedes that of the board of directors. He reports only to the creditors and other affected parties. The shareholders and directors are almost powerless and are unable to control the rescue practitioner.

The board passes a resolution to go into Business Rescue. The resolution includes an affidavit detailing why it is necessary to go into rescue and expresses the belief that the board of directors are of the opinion that it can be saved. The resolution together with a series of forms, is lodged with the Companies and Intellectual Property Commission “CIPC”.

Should there be an application for liquidation before the Courts, an application to enter Business Rescue must be made, which if successful, will lead to the filing of papers with CIPC. The application must include the justification for the application to be put before the Court.

A company can be placed in Business Rescue any time. However should a previous application have failed, application may not be made within 3 months of the failure.

If a business rescue fails, a company will generally apply for liquidation. Furthermore a Business Rescue Practitioner is obliged, once he believes the rescue is futile, to apply for liquidation.

A company in business rescue is protected in that no one, without the agreement of the rescue practitioner, can sue the company for non-payment of debts. There is a temporary moratorium on all claims against the company.

There are a series of actions with very tight timelines which must be observed. Failure to exactly observe the actions and documents to be published, and to meet the timelines can, result in the failure of the rescue.

A company in rescue is run by the practitioner and trades as he sees fit. The directors are in the hands of the BRP.

A company in business rescue is protected in that no one, without the agreement of the rescue practitioner, can sue the company for non-payment of debts. There is a temporary moratorium on all claims against the company.

There are a series of actions with very tight timelines which must be observed. Failure to exactly observe the actions and documents to be published, and to meet the timelines can, result in the failure of the rescue.

A company in rescue is run by the practitioner and trades as he sees fit. The directors are in the hands of the BRP.

A company cannot be sued in business rescue other than in extraordinary circumstances.

The Act envisages a rescue plan being presented to creditors and other affected persons within 25 days of the appointment of the B R Practitioner. However, it is possible, with the approval of creditors to postpone the presentation of the plan almost indefinitely.

Business Rescue should take no less than a few months. In practice it can take years.

The process requires legal oversight to ensure absolute compliance with the Act. There are likely to be two attorneys, one for the practitioner and one for the company. Legal costs can be high.

The Rescue practitioner will be spending a lot of time trying to manage the process. His costs will vary between R1000 and R2500 per hour for time spent. This can wind up costing the company hundreds and thousands of Rands.

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