Busi­ness res­cue leg­is­la­tion has been intro­duced to reha­bil­i­tate com­pa­nies, small, medium or large, that are still eco­nom­i­cally viable but finan­cially dis­tressed. A tem­po­rary mora­to­rium on creditor’s rights is pro­vided with out­side inter­ven­tion in the super­vi­sion of the com­pany, while a plan is devel­oped to ensure the com­pany con­tin­ues on a sol­vent basis. The under­ly­ing phi­los­o­phy is the preser­va­tion of jobs and democ­ra­ti­sa­tion of the workplace.

Accord­ing to the Com­pa­nies & Intel­lec­tual Prop­erty Com­mis­sion (CIPC), as at April 30 2013, 934 busi­nesses, includ­ing close cor­po­ra­tions, pri­vate and pub­lic com­pa­nies, had either filed notice to begin busi­ness res­cue pro­ceed­ings or approached a court request­ing to be placed in res­cue. Among the high-​profile cases were 1time, B&J Meltz and Blyvooruitzicht Mine.

Of the com­pa­nies to which Credit Guar­an­tee has been exposed, 265 have filed for busi­ness res­cue, 143 of which are still in progress , while 122 have been finalised. Of those finalised, 53 went into liquidation.

Con­cerns have been raised about the num­ber of busi­ness res­cue prac­ti­tion­ers (BRPs) avail­able to han­dle the appli­ca­tions. CIPC has accred­ited 140 prac­ti­tion­ers for interim con­di­tional licences, matched by indus­try knowl­edge to the projects for which they were nom­i­nated. The BRP receives a licence for each project; once the project is con­cluded, the licence expires. Where com­plaints of non­com­pli­ance have been received, CIPC will con­sider revok­ing licences.

Some sig­nif­i­cant devel­op­ments in busi­ness res­cue in 2012 were: the court ruled that in busi­ness res­cue no pref­er­ence would be given to the SA Rev­enue Ser­vice and that it would be treated as an “ordi­nary” con­cur­rent cred­i­tor. On enforce­ment of sure­ty­ship in busi­ness res­cue, the court ruled that peo­ple who stood surety for the com­pany would not be released from their oblig­a­tions. A BRP was removed by the high court with a cost order against him and the orig­i­nal res­o­lu­tion to com­mence res­cue pro­ceed­ings was set aside. A new order plac­ing the entity into res­cue was granted and the prac­ti­tioner replaced. In one case the term “rea­son­able prospect” was exam­ined to ensure it entailed a gen­uine attempt to achieve the aims of busi­ness res­cue. It was ruled that the busi­ness res­cue appli­ca­tion had no merit.

Some trends in 2013: cred­i­tors are becom­ing more informed, are think­ing “out of the box” and get­ting involved in res­cue plans. They do not merely accept infor­ma­tion given by BRPs as fact. Cred­i­tors are request­ing equity stakes in the busi­ness as opposed to pay­outs or they pro­pose extended repay­ment peri­ods to avoid hav­ing to com­pro­mise their debt owed. Liq­ui­da­tion appli­ca­tions are being brought by BRPs where cred­i­tors are oppos­ing pro­posed res­cue plans; qual­i­fi­ca­tions and suit­abil­ity of the prac­ti­tioner are being ques­tioned through court appli­ca­tion and the impar­tial­ity of the prac­ti­tioner is being attacked. There is a lack of post-​commencement financ­ing as work­ing cap­i­tal to con­tinue to run the busi­ness — fun­ders are risk averse and not com­fort­able with the process and BRPs.

Ques­tions being asked are: when should a BRP file for sub­stan­tial imple­men­ta­tion? Should he with­draw from the busi­ness as soon as pos­si­ble to save costs or be involved until all cred­i­tors are paid in full as per the adopted busi­ness res­cue plan? How safe is it to leave the busi­ness in the hands of the man­age­ment that brought about its down­fall? Is busi­ness res­cue a long– or short-​term fix?

There is a need for a reg­u­la­tory body to ensure BRPs have the nec­es­sary for­mal qual­i­fi­ca­tions and that there is per­sonal lia­bil­ity for BRPs that don’t per­form, with con­comi­tant claims and dis­ci­pli­nary action against them.

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