Speed is of the essence when a company is financially distressed and in the implementation of §the business rescue process. The new Companies Act sets out very short time periods and it is important that all stakeholders have access to competent insolvency, business rescue & restructuring lawyers who can be called upon at any given time.
The Companies Act encourages a business to act swiftly at the first signs of any financial distress. 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.
Business rescue proceedings was specifically designed and incorporated into our legislation to assist ailing companies and allowing them a temporary breathing space to recuperate and become a successful concern in due course.In a recent decision of the South Gauteng High Court, in the case of Welman v Marcelle Props 193 CC JDR 0408 (GST), the court stated that “business rescue proceedings are not for terminally ill close corporations. Nor are they for chronically ill. They are for ailing corporations, which given time will be rescued and become solvent”. This statement supports the contention that at the first signs of financial distress, a company should apply for business rescue..
Restructuring of companies in financial distress is on the increase globally. South African companies which are financially distressed or which trade in insolvent circumstances now has an opportunity to reorganize and restructure. This has far-reaching effects on creditors; financial institutions; shareholders; employees and restructuring specialists. The purpose of business rescue in South Africa is to maximise the likelihood of the company continuing to exist on a solvent basis.
The key to business rescue will be the successful development and implementation, if approved by creditors, of a rescue plan to rescue the company by restructuring its affairs, business, property, debt, other liabilities and equity. Should this not be possible, the implementation of a plan should result in a better return for the company’s creditors or shareholders, than would result from an immediate liquidation of the company.
The members of Moollas Attorneys have carefully considered the new legislation and the manner in which business rescue proceedings are to be implemented.
For more information, please feel free to contact our offices or click on the link below and a specialist team member will contact you.
