Business Rescue Practitioners – Saving Businesses in Financial Distress
The need to restructure companies in financial distress has become increasingly prevalent worldwide. In recognition of this global trend, chapter 6 of the new Companies Act, No. 71 of 2008, has introduced the concept of business rescue to the South African business and legal landscape. Business rescue offers financially distressed companies an opportunity to reorganise and restructure. The restructuring is aimed at improving the financial outcome for the various stakeholders. A business rescue practitioner will be appointed to assist the financially distressed company in achieving the best possible outcome for all affected parties. The practitioner is appointed either by the company, its board of Directors, or under an order of the court.
Business rescue is a legal process created to enable financially distressed companies to implement measures to rehabilitate their operations, preserve jobs, and maximise the likelihood of the company’s survival. A company is placed under business rescue when the board of Directors passes a resolution, or an affected person applies to the court. An affected person can be a creditor, financial institution, shareholder, or an employee of the company.
The Role of a Business Rescue Practitioner
The role of a business rescue practitioner in South Africa is pivotal in overseeing and facilitating the business rescue process. A business rescue practitioner’s primary responsibility is to act in the best interests of the financially distressed company and all its stakeholders. A business rescue practitioner must meet the requirements prescribed by the Companies Act and be a registered member of a professional body recognised by the Act. They are tasked with:
- Assuming control and management of the company’s affairs for the duration of the business rescue process. A business rescue practitioner makes decisions and implements changes to improve the financial position and viability of the business. They have the power to negotiate and enter into agreements on behalf of the company.
- Developing a rescue plan, which outlines the proposed measures and strategies to rehabilitate the company. The plan should maximise the likelihood of the company’s continued existence, achieve a better outcome for its creditors and shareholders, and preserve jobs where possible. The business rescue practitioner is responsible for implementing the rescue plan and ensuring its effective execution.
- Engaging with stakeholders. They must consult with the various stakeholders, including creditors, shareholders, employees, trade unions, and any other affected parties while formulating the rescue plan.
- Overseeing the restructuring process, including renegotiating contracts, restructuring debt, disposing of assets, or making operational changes with the aim of optimising the company’s financial position.
- Providing regular updates and reports to the relevant parties regarding the progress of the business rescue process. Proper records need to be maintained ensuring transparency and accountability throughout the process.
- Complying with the provisions of the Companies Act and all other applicable laws and regulations while acting diligently, ethically, and with professional integrity in the performance of their duties.
The role of a business rescue practitioner in South Africa is multifaceted, involving general business management, financial and legal expertise.
Let the Experts Guide You
Financial challenges can arise unexpectedly and cause businesses to experience short-term cash flow problems. They then struggle to meet their financial obligations. Despite facing these difficulties and if the company is able to continue trading, business rescue or corporate restructuring offers a possible solution.
With a well-established track record of success, Francois Uys Incorporated Attorneys are committed to guiding businesses navigating financial distress to achieve optimal outcomes. With over 8,000 completed cases, our expert team of insolvency, business rescue, and company restructuring lawyers offers unparalleled ongoing support to clients. With 33 years of dedication to companies in financial distress, we can provide expertise and assistance on any aspect of business rescue.
It is vital to act timeously should your company be experiencing financial distress. The Companies Act provides relatively short time periods in which to act. So, book an appointment with Francois Uys Inc Attorneys today.
Disclaimer: This article is for information purposes only. It does not constitute legal advice and cannot be used to make any decisions. For advice on the topic of business rescue contact Francois Uys Inc Attorneys. The information is relevant as of the date of publishing.
