The Benefits of Business Rescue for Companies

Often a company will struggle to maintain adequate cash flow for operations. There are alternative options available to the owners and executives of these companies. Business rescue offers several benefits and advantages over insolvency.

Following the Companies Act of 2008, a company may apply for business rescue. To be successful in this process, it must be able to achieve solvency. This assumes that the company is able to pay off its debt to any of its creditors.

In this way, business rescue has much to offer in our current economy. This article will cover the advantages of this process for failing businesses.

Business Rescue May Provide a Better Return for Creditors

This serves as one of the primary potential benefits of business rescue. If successful, creditors can make a greater return on any outstanding debts. Insolvency also typically has poor returns on debts for a company.

This improved return follows a realisation of effective company asset utilisation. This comes as a result of effective business rescue for companies. Additionally, if successful, this also saves on extensive liquidator’s fees.

Business Rescue May Help the Company Achieve Solvency

When business rescue for companies is successful, they may operate on a solvent basis. This is if the relevant creditors write off an agreed upon percentage of the company’s debt.

This arrangement may end up causing financial damage to the creditors, as well. But, there is potential for long term benefit on their part if the company rescued as per the Companies Act of 2008. Eg, the rescued business may continue buying goods and services from the creditor.

A Rescued Company Is Preferable to a Liquidated Company

This is one of the greatest potential benefits of business rescue. There is a great amount of contributions a rescued company can provide. Usually, this will greatly outweigh the benefits provided by a liquidated company. For example, creditors make much less returns on liquidated assets. As well, those returns usually don’t make up for the total debt owed to them.

Business rescue for companies has the potential for long-term benefits.

Preservation of Employees and Assets

In our current economic climate, employment and employment opportunities are scarce. Business rescue as described by the Companies Act of 2008 offers a potential solution. A successful business rescue allows for the preservation of existing employment. Managing to keep employees offers its own benefits. For example, these employees can stimulate other businesses with their income.

This preservation also extends to the company rescued. From business rescue for companies, they’re able to continue their operations. This company can make its own contribution to other companies. This contributes to stimulating the economy, as a result.

A healthy operational status means that a business can pay for existing and future debts. This also applies to the employees of said business.

Business Rescue is not Always Viable

There are many potential benefits of business rescue. But, it is not always a viable option for failing companies. Several factors need consideration before determining the viability of rescuing the company. It is also not always the preferred option.

Each option for businesses has their place, including business rescue for companies. Not every financially distressed company is viable for rescue. For example, there may not be a realistic prospect for rescuing the company. This may be a result of overwhelming debt, In which case liquidation is the best option.

As outlined in the Companies Act of 2008, illegal activities also affect viability. If the company is under investigated, or is suspect for, illegal activities such as fraud, then it cannot apply for rescue.

Want to make an enquiry? Contact Us Today!

[/fusion_text]