THE fact that most busi­ness res­cue appli­ca­tions did not result in the sur­vival of the enter­prises is not unusual when com­pared to inter­na­tional trends, says Lara Kahn, a part­ner at law firm Web­ber Wentzel.

The busi­ness res­cue process was intro­duced in 2011 with the main objec­tives of sav­ing jobs, as South Africa is strug­gling to cre­ate employ­ment, and of encour­ag­ing much-​needed investment.

About 30% of all Chap­ter 11 fil­ings in the US, which is sim­i­lar to our busi­ness res­cue process, lead to a suc­cess­ful restruc­tur­ing. A sim­i­lar rate for South Africa would be a con­sid­er­able achievement.

Ms Kahn spoke to Busi­ness Day on Fri­day, after a con­fer­ence in Johan­nes­burg that exam­ined the progress made 18 months after busi­ness res­cue was intro­duced through the Com­pa­nies Act.

She said there had been abuse of the busi­ness res­cue process, where com­pa­nies used it as a defence against cred­i­tors’ liq­ui­da­tion applications.

In all the cases where this has hap­pened the courts have granted the liq­ui­da­tion, because if a company’s cred­i­tors have already filed a liq­ui­da­tion appli­ca­tion, it is already too late for a busi­ness res­cue. The com­pany can no longer be res­cued. That is abuse,” she said.

The Com­pa­nies and Intel­lec­tual Prop­erty Com­mis­sion (CIPC) said in its 2011-​12 annual report it was only aware of one suc­cess­ful turn­around in the period under review, which led to 4,500 jobs being saved. How­ever, CIPC fig­ures do not in include busi­ness res­cue appli­ca­tions brought before the courts.

More recent sta­tis­tics indi­cate that less than 100 com­pa­nies had been res­cued and that about 840 com­pa­nies had so far applied since the intro­duc­tion of busi­ness res­cue. CIPC sta­tis­tics showed pri­vate com­pa­nies (64%) were most likely to enter into busi­ness res­cue, fol­lowed by close cor­po­ra­tions (23%) and pub­lic com­pa­nies (13%). The major­ity of appli­ca­tions were from the invest­ment sec­tor, fol­lowed by whole­sale and retail, and manufacturing.

Ms Kahn said the busi­ness res­cue pro­vi­sions were com­plex and needed some tweak­ing, but were cer­tainly here to stay.

There has been quite a lot of polit­i­cal invest­ment in this. It came in dur­ing a raft of social reform leg­is­la­tion, includ­ing the Com­pa­nies Act that has the busi­ness res­cue chap­ter, the National Credit Act and the Con­sumer Pro­tec­tion Act.”

The unin­tended con­se­quence of this com­plex­ity was the cost of busi­ness res­cue, Ms Kahn said.

Strate­gic Turn­around Solu­tions direc­tor Gert Holtzhauzen has pre­vi­ously said one of the down­sides of the busi­ness res­cue process was the legal issue, which added to the costs.

Cred­i­tors arrive at the first meet­ing with a string of lawyers attack­ing the process”.

Fur­ther, Mr Holtzhauzen expressed frus­tra­tion with prac­ti­tion­ers who were not prop­erly qual­i­fied to carry out rescues.

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