Filing for Business Rescue?
THE MOST IMPORTANT DECISION TO BE MADE: WHO TO APPOINT AS BUSINESS RESCUE PRACTITIONER?
IS YOUR BUSINESS RESCUE PRACTITIONER THE RIGHT CHOICE?
The decision on who to employ as a business rescue practitioner (BRP) is one of the most crucial a distressed company can make. Yet this decision has to be made quickly at a time that is often highly stressful and when time is of the essence.
According to Prof. Marius Pretorius of the University of Pretoria, whose recent scenario research conducted among various role players such as banks and BRPs inspired this article, the South African business rescue scene is, to say the least, rather gloomy. Prof. Pretorius maintains that too many “experts” are coming to the fore (and being appointed) with questionable rescue experience and qualifications.
These so-called “specialists” are capitalising on the lack of regulation in the law governing the certification of the business rescue profession. Prof Pretorius’s research scenarios have brought to light the following concerns:
INDUSTRY CONCERNS: Currently there is growing unease about the various allegations levelled at the business rescue industry. These include the following:
KEY UNCERTAINTIES that drive the scenarios:
FINALLY CHOOSING A BUSINESS RESCUE PRACTITIONER
The most important decision a distressed company must take is the choice of BRP. When making this decision, several important questions should be considered:
KEY CONSIDERATIONS WHEN CHOOSING: “IT MAY BE YOU LAST DECISION”
Once management has answered these questions satisfactorily they are ready to select the BRP. This should be done by considering the following key requirements:
Reputation. No BRP expects to succeed without first gaining the confidence of creditors, as well as accessing new sources of credit such as post commencement funding. A company considering the appointment of a BRP should check the candidate’s reputation with leading bankers, attorneys, accountants, financial advisors, factors, and trade creditors. Experience is the key credential.
Managerial skills. As the chief decision maker and implementer of new strategies, the BRP must be a multi-disciplined and knowledgeable business person. One should look for a person who is prepared to act assertively, understands your business, is “hands on” and has proper negotiating skills.
Business rescue practice knowledge: The practitioner should have sound knowledge of the rescue industry, best practice principles, the legislation that governs the process and the main driving forces. Knowledge in these areas will reduce exposure and the danger of being attacked by hostile affected parties.
Fee structure. Fee structures generally contain a fee plus costs. Make sure that the practitioner does not charge unnecessarily for “external” costs (such as lawyers and accountants because the BRP him/herself does not have the expertise). The fee structure should be clear and fair. Companies should make sure they can afford such services to avoid trading one set of problems for another. The company should insist that the proposed contract include an incentive or performance arrangement, which places a portion of the business practitioner’s contingency fees at risk.
A BRP is expected to work quickly and confidently with a range of parties, including banks, creditors, accountants, lawyers and others. It is important that they are able to build rapport with these parties and any experienced turnaround consultant will already have an established reputation.
It is important to check this reputation and ensure the BRP has good standing in these critical areas. Most importantly, established BRPs have established networks that support their business expertise in assisting companies to move through these difficult times. Turnaround practitioners can step in and implement solutions; they can, if required, step into management roles and turn your business around purely because they know and understand business.
Dr Gerhard Holtzhauzen CEO Strategic Turnaround Solutions (Pty) Limited
With acknowledgement of Dr Marius Pretorius’ article on future scenarios
Professor – Business Rescue, Strategy and Leadership
Department of Business Management
University of Pretoria
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