Part Two

In our previous post, we discussed some elements of understanding business rescue. We had a look at how it serves as an alternative to liquidation for financially distressed companies, and more. Here, we’ll have a look at more factors about it. From the proceedings to the conclusion, this post will top of our summary of business rescue.

Updated Rescue Procedure

In March of last year, the CIPC issued a practice note on an updated business rescue filing procedure. Companies need to follow this updated procedure for them to place their company under rescue. The practice note itself took effect from 1 April 2020.

The practice note outlines the forms and documentation that needs submission to the CIPC. Additionally, it outlines at which different stages companies need to submit these documents to the CIPC. As well as these filing requirements, there exist updated requirements for placing a company under rescue. Financially distressed companies looking to avoid liquidation need to heed this updated procedure.

 In our previous post, we discussed some fundamental elements of business rescue.

Appointing the Rescue Practitioner

After beginning the rescue proceedings, the board appoints a rescue practitioner. The role of the practitioner implies full managerial control over the company. His managerial powers will substitute those of the board of directors, as well as pre-existing management. This does not necessarily exclude them from their roles in the company. Rather, they will continue to function, but under the authority of the rescue practitioner.

The business rescue practitioner has the job of developing and putting into place the rescue plan. As well as this, the rescue practitioner has the following powers:

• The power to remove a person or persons that form part of the company’s pre-existing management.
• The power to appoint a person or persons to the company’s management structure.

The Business Rescue process does not provide for certain company types, such as Sole Traders.

Exceptions to the Companies Act

The Companies Act comprises certain provisions. But, these provisions do not apply to the following entities and associations:

• Unincorporated associations
• Sole Traders
• Partnerships
• Business Trusts
• Co-Operatives

The Act only provides for certain companies which are financially distressed. Additionally, those companies must be looking to avoid closure or liquidation. Situations Where Rescue is not Suitable

Not all companies will be suitable for business rescue. This specifically depends on the particular circumstances of the company in question. In fact, there is a possibility that liquidation will be more beneficial to creditors and shareholders alike. Again, this depends on the exact circumstances.

In some cases, selling the financially distressed business to an interested party is ideal. Sometimes, it would be quicker, more effective, and less expensive to do so. Section 155 of the Companies Act mentions that a compromise with creditors may be more appropriate than rescue.

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