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 business rescue

Business rescue is simply a legal process to assist businesses that are in financial distress

From time to time we get inquiries from business owners whose businesses are struggling financially and who seek advice regarding their options. One of those options is Business Rescue; which is a relatively new commercial concept.

This blog focuses on shedding a little more light on the very complex and technical issue of business rescue and the new Companies Act, which is Act No 71 of 2008; and we are going to focus on Chapter 6 dealing with Business Rescue.

We hope to answer the following question for entrepreneurs and business owners in general:

 What is business rescue?

It is simply a legal process to assist businesses that are in financial distress. That is the simplest explanation of business rescue.

Although business rescue in South Africa got off to a rocky start since the inception of the Act on the 1st May 2011, it seems to have become a recognized process as more and more affected parties as well as major financial institutions familiarise themselves with the legal process and its methodology. South Africa has furthermore recently seen major enterprises like One Time Airlines and TOP TV undergo the process of business rescue and some of the Gupta companies are also presently going through this process.

Cons first:

On the one hand and currently, the single most adverse effect of business rescue proceedings is the negative publicity the company undertaking such proceedings undergoes in the financial world. Financial institutions are reluctant to grant post-commencement finance for companies under business rescue and in most instances, such financial institutions may elect to suspend its facilities with the company pending a renewal application by the business rescue practitioner appointed.

Then the pros:

On the other hand, business rescue provides a breathing space for companies experiencing financial stress, where creditors are not allowed to proceed with or execute on any legal proceedings pending the outcome of the business rescue proceedings. Business rescue furthermore has a recognized international model whereby the obligations of the company towards its creditors, cannot only be restructured but also compromised over an extended period of time by the appointed business rescue practitioner. When it comes to the restructuring of an entity, business rescue ensures for a regulated environment in which such restructuring can occur.

Even if a company is found to have passed the point of being successfully rescued, business rescue proceedings enable the appointed business rescue practitioner to endeavour a better return for creditors than would be the case in the liquidation of such an entity. No wonder financial institutions are currently electing to forcefully place companies in financial distress under business rescue instead of proceeding with liquidation steps as was the normal practice.

If you have a query in this regard; please contact us.

Please also visit our website at www.legaladviceoffice.co.za or send us an email to This email address is being protected from spambots. You need JavaScript enabled to view it. with your legal questions.

About our author:

Hugh Pollard (Legal Consultant), has a BA LLB and 42 years’ experience in the legal field. 22 years as a practicing attorney and conveyancer; and 20 years as a Legal Consultant.

082-0932304 (Hugh’s Cell Number)

This email address is being protected from spambots. You need JavaScript enabled to view it.

www.legaladviceoffice.co.za

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