‘‘Business rescue’’ means proceedings to facilitate the rehabilitation of a company that is financially distressed by providing for—

(i) the temporary supervision of the company, and of the management of its affairs, business and property;

(ii) a temporary moratorium on the rights of claimants against the company or in respect of property in its possession; and

(iii) the development and implementation, if approved, of a plan to rescue the company by restructuring its affairs, business, property, debt and other liabilities, and equity in a manner that maximises the likelihood of the company continuing in existence on a solvent basis or, if it is not possible for the company to so continue in existence, results in a better return for the company’s creditors or shareholders than would result from the immediate liquidation of the company;

When is a company financially distressed?

‘‘Financially distressed’’, in reference to a particular company at any particular time, means that—

(i) it appears to be reasonably unlikely that the company will be able to pay all of its debts as they become due and payable within the immediately ensuing six months; or

(ii) it appears to be reasonably likely that the company will become insolvent within the immediately ensuing six months

Reasons why Businesses fail

  • No mission, no clear goals, stated objective to make a pile of money.
  • Customer not perceived as a top priority.
  • Loss of momentum in sales, poor sales performance.
  • Impatience, trying to get rich quickly.
  • Operating outside own area of excellence, diversification into non-core businesses.
  • Failure to focus on priorities, failure to focus on the 20% that delivers the 80%
  • Failure to establish competitive advantage, such as: better quality or cheaper or faster or nicer etc
  • Product not suited to customer requirements.
  • Poor quality of product and support.
  • Failure to identify customers.
  • Reactive rather than proactive selling
  • Incomplete marketing strategy, poor sales programme.
  • Poor leadership, lack of integrity and competence of key staff, lack of commitment and persistence.
  • Mismanagement of working capital.
  • Failure to analyse and respond to trends, changes in the market place.
  • Failure to control overhead drift.
  • Inadequate financial records, poor budgeting, poor cash control.
  • Action without planning, failure to collect relevant facts.
  • Paralysis by analysis, too much analysis, not enough action.
  • Poor relations with staff and employees, poor communications, command and control mentality.

Business Rescue Proceedings

The Companies Act 71 of 2008 together with the Companies Regulations of 2011 define the process to be followed in a Business Rescue case.

A company can go into Business Rescue proceedings from one of the following:

Company Resolution to begin business rescue

Court order to begin Business Rescue.

    Court Order can be from any of the affected parties including employees

 Compromise with creditors

The rest of the process will be followed as defined by legislation and court decisions with the business rescue practitioner managing the whole process.