Section 6 of the companies act 71 of 2008, make provision for companies and closed corporations that find themselves in a distressed position, to enter business rescue proceedings should there be a reasonable prospect to save the business.
The proceedings require a qualified Business Rescue Practitioner to take control of the Board, place a general moratorium over the company assets, evaluate the reasonable prospect and decide if the business can be turned around by implementing a turnaround strategy or should the business be placed into liquidation.
Business Rescue legislation was designed to provide distressed ventures with the opportunity to restructure the venture and trade out of distress. It creates a financial breather for a company that can trade profitable, and render a economical benefit to all affected persons.
Key Business Rescue concepts as found in the act;
Financially distressed, means that-(i) it appears to be reasonably unlikely that the company will be able to pay all of its debts as they become due and payable within the immediately ensuing six months; or(ii) it appears to be reasonably likely that the company will become insolvent within the immediately ensuing six months;
Business Rescue, means proceedings to facilitate the rehabilitation of a company that is financially distressed.
Business rescue practitioner, means a person appointed, or two or more persons appointed jointly, in terms of this Chapter to oversee a company during business rescue proceedings.
Business rescue plan, A business rescue plan must be published within a specific time as set out in the act. The plan is intended to explain to all affected persons how they will benefit from the rescue proceedings and why it is best to restructure the organisation.
Affected person, is a shareholder, creditor, registered trade union representing employees of the company; and employees of the company not represented by a trade union.
General Moratorium, Business rescue offers the protection of all assets under the control of the business. Assets under control of the company cannot be claimed or removed unless prior written permission is granted by the Business Rescue Practitioner.
Business Rescue can offer your distressed venture a lifeline. Ensure that you appoint a practitioner of note!