22/04/2020
WHAT IS BUSINESS RESCUE?
Business rescue proceedings are proceedings aimed to facilitate the rehabilitation of a company that is financially distressed. a Temporary moratorium (stay) on the rights of claimants against the company or in respect of property in its possession; and the development and implementation, if approved, of a business rescue plan to rescue the company by restructuring its business, property, debt, affairs, other liabilities and equity (section 128(1)(b)).
WHAT IS THE AIM OF BUSINESS RESCUE?
The aim of business rescue is to restructure the affairs of a company in such a way that either maximises the likelihood of the company continuing in existence on a solvent basis or results in a better return for the creditors of the company than would ordinarily result from the liquidation of the company (section 128(1)(b)(iii)).
WHEN SHOULD A COMPANY COMMENCE BUSINESS RESCUE?
A company should commence business rescue proceedings at the first signs of it being financially distressed, within the meaning of the Act. That is, either when it is reasonably unlikely that a company will be able to pay its debts when they fall due for payment in the immediately ensuing six months or when it is likely that the company will become insolvent in the immediately ensuing six months.
WHEN DOES BUSINESS RESCUE BEGIN?
In terms of section 132 of the Act business rescue proceedings commence when β
the company (i) files a resolution to place itself under supervision in terms of section 129 of the Act; or (ii) applies to court for consent to file a resolution in terms of section 129(5)(b) (i.e. if a company fails to comply with the provisions of subsections (3) and (4) it must approach the court for leave to file another resolution if it wishes to do so within the three month restricted period); or
a person applies to court for an order placing the company under supervision in terms of section 131(1); or
a court makes an order placing a company under supervision during the course of liquidation proceedings or proceedings to enforce a security interest (section 131(7)).