Introduction to business rescue proceedings
In simple terms, business rescue proceedings take place when a company becomes financially distressed, and 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 it appears to be reasonably likely that the company will become insolvent within the immediately ensuing six months.
When does a company get placed under business rescue?
There are two ways in which a company can be placed under business rescue, namely:
What is the aim of business rescue proceedings?
Business rescue proceedings are aimed at rehabilitating a company that is financially distressed. The main aim of the proceedings is to get a business rescue practitioner to restructure the affairs of a company so that it increases the likelihood of a company to continue existing on a solvent basis so that it may be able to pay off any debts that are due or that may become due.
Who is a business practitioner?
A business rescue practitioner is a person appointed, or two or more persons appointed jointly, to oversee a company during business rescue proceedings.
According to Section 138 of the Act, a person may be appointed as a business rescue practitioner if he/she-
What is the role of a business rescue practitioner?
The business rescue practitioner who satisfies all the requirements of section 138 of the Act must be appointed within 5 business days after a company has adopted and filed a resolution (if the company commences business rescue proceedings voluntarily). If the business rescue proceedings commence by way of an order of court, the court may appoint an interim business rescue practitioner. The business rescue practitioner is required to reduce the debt in order to enable that the company continues trading on a solvent basis. He/she is required to investigate the company’s affairs, and financial situation, and thereafter a business rescue plan must be drawn up by the business rescue practitioner which will then be put to vote by the creditors of the company.
Once it is successful, the business rescue practitioner must then follow through the proposed plan and attempt to save the company.
How does the business rescue process unfold?
Once a company commences business rescue proceedings either voluntarily (section 129 of the Act) or by an order of a court (section 131 of the Act), the following actions are suggested by the Act:
What happens if the Practitioner discovers that the company cannot be rescued?
If at any time during business rescue proceedings, the business rescue practitioner determines that there is no reasonable prospect for the company to be rescued, then he/she has to then inform the court, as well as the company, and all the affected parties which are the shareholders, creditors, employees, or a registered trade union representing employees of the company.
The business rescue practitioner must then apply to the Court for an order to discontinue the business rescue proceedings and the Company must be placed into liquidation.
When does business rescue proceedings end?
In terms of section 132 of the Act business rescue proceedings end when:
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