Chapter 6 of the Companies Act prescribes two possible
ways of commencing Business Rescue Proceedings.
The first and most common procedure is a voluntarily
resolution by the management of the company. The management of a company signs
a resolution in terms of the Companies Act and applies to the Companies and
Intellectual Property Commission to commence business rescue.
The application is accompanied by an comprehensive
affidavit setting out the reasons for the company's financial distress as well
as its prospects of being rescued.
The second and more expensive procedure is via a High
Court application. The affidavit accompanying application to the High Court is
more comprehensive and more expensive as any affected party has a right to
oppose this application.
This procedure is mostly used when the management of the
company is unwilling or unable (due to pending liquidation) to commence
business rescue voluntarily.
Once the application is granted by either the Court or
the Commission to process as well as the protection afforded by the Companies
Act is the same.
Within five days after the application is granted, the
company must appoint a licensed Business Rescue Practitioner (BRP).
The BRP will then
arrange the first meeting of creditors and employees within 10 days after
his/her appointment. At this meeting the creditors will be informed of the
status of the company and will receive proof of claims from the creditors.
Within 25 days after the BRP's appointment a business
rescue plan will be published in which the way forward in regards to the
company's affairs is explained.
It is in terms of the business rescue plan in which the
obligations of the company will be restructured which could include deferment
or cancellation of payment obligations towards creditors, investments etc.
Within 10 days after the business rescue plan is
published a second meeting of creditors will be held in which the business
rescue plan is considered by all the parties affected by it, being mostly
creditors.
If creditors vote against the adoption of a business
rescue plan the court can be approached for assistance if the vote against the
plan was unreasonable.
I balance is therefore struck between creditors and the
company. The rule of thumb in measuring the reasonableness of a business rescue
plan is based on the return a creditor would receive if the company were to be
liquidated immediately.
In example, if a creditor would only receive 25 cents in
a Rand it would be unreasonable for that creditor to vote against a plan in
which a return of 30 cents would be received.
Once a plan has been adopted the management of the
company as well as the business rescue practitioner proceeds to implement the
adopted plan at which stage the business rescue process comes to a close.
All the creditors are being bound by the terms of the
business rescue plan and will not be able to proceed with legal proceedings
unless the company itself fails to comply with the terms of the business rescue
plan.
Depending on various circumstances the process usually
takes about three months.
my company a cc is in liquidation can istill get help.
ReplyDeleteAlson
Yes, until the final liquidation and distribution account has been filed. You may still apply for business rescue. You will however, have to apply to Court to have the CC be placed under supervision (business rescue).
ReplyDeleteI am a sole prop. business owner, is there some remedies, I have business creditors and personal creditors
ReplyDeleteYes, you will be liable in your personal name foe such debts. write to me juan@businessrescuesolutions.co.za for more info
DeleteOur company is in financial distress with its major creditor being the receiver of revenue.
ReplyDeleteWould business rescue be able to assist in this regard?
Yes, Business Rescue can assist with the SARS as they are a normal creditor in business rescue proceedings.
DeleteI am a sole proprietor with a business that is really not doing well at all. We do not have many creditors and our main requirement is to get out of the balance of our 9 month lease agreement, and not to incur any further debt in running the business. Can Business Resuce assist?
ReplyDeleteA sole proprietor does qualify for debt review which allows your debts to be restructured. Debt in terms of a rental agreement does however not qualify as it is not a credit agreement.
DeleteA sole proprietor does not qualify for business rescue under the Act as it only applies to Companies and Closed Corporations.
ReplyDeleteYou may however qualify as a consumer under the Consumer Protection Act which allows for the cancellation of agreements with 25 days notice. These agreements include rental agreements off coarse.
My company is in financial distress after a scam of almost R3m, and left my company under serious debts, because that was the company's profit of 6 years. Will I be assisted? The business is sustainable but it needs a kickstart and we went for a course in risk management.
ReplyDeleteIt will all depend on the specific circumstances of the Company. As long as there is reasonable prospects of rescuing the Company business rescue remains an option.
ReplyDeleteIf you wish you can send us your e-mail address and we will correspond directly.
Can a farmer also be rescued by a BRP. Farm in financial destress due to droughtand a fualt occuring in the offices of the Gamtoos irrigation board, who supplies our water to farmers in area, leaving me without water for 3 months. This was in 2004, did not have money to take them to court and apparently it is to late now. Farm just never bounced back from this setback.
ReplyDeleteNicky
ReplyDeleteIt would appear companies who apply for business rescue are being Protected form making good on their outstanding debts,you receive the letter to say this is what has transpired and then you never hear from them again. They should not be able to use it as an escape clause, as a creditor of such a company how should one proceed.
You should attend the meetings to get direct feedback from the Business Rescue Practitioner. The BRP is obliged to provide feedback on a monthly basis.
ReplyDeleteThe business rescue plan must be published within 25 days after the BRP was appointed. The plan should provide all the information you may need.