Amidst the pandemic, numerous businesses faced dire financial circumstances. However, there are other options to consider instead of applying for liquidation. Utilising Business Rescue, a revolutionary solution. Simply put, its debt review, but for businesses.
There are, however, notable distinctions between debt review and business rescue.
Discover the power of Business Rescue and unlock its potential to transform your company's future. Join us as we delve into the intricacies of this game-changing solution and explore the myriad of benefits it can bring to your business.
What is the purpose of Business Rescue, and how does it work?
The primary objective of business rescue proceedings is to streamline the effective recovery of a financially distressed organisation, aiming to enhance the chances of the company's survival on a sustainable financial basis.
If that is not possible, the goal is to ensure the company remains operational, ultimately leading to a more favourable outcome for the company's creditors or shareholders compared to an immediate liquidation.
Which law governs the process?
Why CureDebt?
We have a strong focus on assisting businesses and individuals confronting financial difficulties. With our wide range of services, we are well-equipped to offer expert advice and solutions for the topic at hand.
To file or not file? That is the question.
Most businesses that file is small to medium enterprises (SME's) that are run by the business's owners themselves. The decision to file for business rescue is a significant decision that requires careful consideration.
A competent business rescue practitioner (BRP) must ensure that a potential client receives comprehensive information regarding the advantages and disadvantages of business rescue, along with a clear understanding of the process.
The Act's Provisions: For both voluntary and mandatory procedure initiation.
Voluntary: The company's board of directors may decide to initiate voluntary business rescue proceedings.
Compulsory: An affected person may petition the court at any time for an order placing the company under supervision and starting legal proceedings. A business rescue practitioner temporarily supervises and manages the company's affairs, businesses, and property.
Who will control the company and make key business decisions on its behalf?
During a company's business rescue proceedings, the practitioner has full management control of the company in place of its board and pre-existing management, in addition to any other powers and duties.
This includes assuming responsibility for the bank account mandate.
Except as provided in S133(1), no legal proceeding, including enforcement action against the company, or relation to any property belonging to the company or lawfully in its possession, may be commenced or proceeded with in any forum during the proceedings.
Post-Commencement Finance
Funds provided to a company once it has entered into business rescue proceedings or after providing services are known as post-commencement finance.
It can also include funds that a company receives during the business rescue process.
Developing and executing a plan of action to restore the business.
After consulting with creditors, other affected parties, and company management, the practitioner must prepare a business rescue plan for consideration and prospective adoption at a Section 151 meeting.
There is provision for all stakeholders (Affected persons as designated in the Act)
Affected parties, defined as shareholders, creditors, employees (or their representatives), or a registered trade union representing the company's employees, have various rights and play an important role in the process.
Time constraints
Should a business be rescued through the voluntary process? Failure to adhere to a strict timeline could lead to affected parties filing court applications to cancel the business rescue.
Timeline
When the following documents are lodged with CIPC in the prescribed manner, business rescue proceedings begin.
The company's board of directors voted to initiate voluntary business rescue proceedings.
2.
Board resolution designating a director or directors responsible for signing and lodging all documentation required for the business rescue process.
3.
A sworn affidavit from the responsible director stating that the business is in financial distress and the reasons for this, as well as the reasons for believing the business has a reasonable chance of being rescued.
4.
CoR 123.1 FORM, duly signed by the responsible director.
5.
A certified copy of the responsible director's identification document.
6.
Within five (5) business days of adopting and filing a resolution, the company must publish a notice of the resolution and its effective date to every affected person in the prescribed manner.
For more information, contact Cure Debt. Your Debt Relief Specialist.
