The key to getting a business back on its feet is providing the right advice, and doing so early. Although business rescue provides companies with a shield of protection through a moratorium on asset repossessions by creditors, it is not a cure-all solution. Business rescue is for companies with the potential to become financially viable and solvent again.
Judge Tsoka, in Welman vs. Marcelle Props 193 CC judgement, endorsed the process when he said, “Do not wait until too late – business rescue proceedings are neither for the terminally ill … nor for the chronically ill”.
Currently, it appears as though many businesses do not understand the process and are therefore not always comfortable pursuing business rescue as an alternative.
Business rescue becoming more acceptable
Business rescue is, however, gaining popularity and more people are turning to the process to save, salvage or find the best solution for their business, as indicated by the latest statistics released by the Companies and Intellectual Property Commission (CIPC).
These show that affected parties, who were initially cautious to consider business rescue as an alternative, are now willing to enter the process due to the increase of successful implementations by competent business rescue practitioners.
It’s important that practitioners have strict vetting processes and only accept assignments where there is at least a chance to create a better exit route for creditors than liquidation.
The aim should be to avoid liquidations and job losses by providing businesses in distress with proper advice in instances where it is still possible to re-organise and restructure the entity for the benefit of all affected parties.
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A successful business rescue
The major issue whilst attending to any business rescue assignment is to ensure the rights and interests of all relevant stakeholders are balanced. This is done through regular meetings with stakeholders and the involvement of a creditors’ committee.
An open relationship with the formal credit sector, i.e. banks and SARS, is important as they still are, in certain instances, sceptical of the process.
The involvement of management in the process is critical as they understand their offering and clients. Management continue trading activities, while the restructuring and implementation of the business rescue plan takes place, in such a manner that will secure the survival of the company.
Despite business rescue in South Africa getting off to a difficult start and many key stakeholders still viewing the process with scepticism, proven success stories that have saved businesses and jobs are hard to ignore. Business rescue allows impartial experts find an equitable solution for the future of a company in distress and should not be discounted or considered a last option.