| Name of Business: | IT Hardware and Software Distributor |
| Entity Type: | Proprietary Limited (Pty Ltd) |
| Location: | Eastern Cape, South Africa |
| Public Interest Score: | 83 |
| Staff: | 52 Employees |
| Dates of Business Rescue: | January 2014 - October 2016 |
| Total Debt: | R6 056 810 |
| Vote of Proposed BR Plan: | 86.43% in Favour |
This Computer Services business was established in 2009 and provides computer hardware, software, consumables, and IT support services, primarily to governmental departments. The company faced significant challenges due to delayed payments from public institutions, staff issues, a high-cost structure, and some irregular spending. Faced with financial distress, the company considered liquidation but ultimately opted for business rescue.
By 2013, the business was experiencing severe financial distress. Because of its rapid growth, the company struggled to manage its cashflow, specifically its expenses, leading to a loss of trust from suppliers due to unfulfilled commitments. Additionally, personal spending by shareholders exacerbated the situation, resulting in the termination of accounts and threats from bankers to recall the overdraft. The directors decided to enter voluntary business rescue proceedings under Section 129 of the South African Companies Act in September 2013.
An amended business rescue plan was presented to creditors in January 2014. This plan included the continued involvement of practitioners until the restructuring was completed. The restructuring involved staff retrenchments, discontinuation of unprofitable product lines, stock reduction, and formalizing a remuneration package for shareholders and directors. The practitioners implemented the plan, secured credit facilities with suppliers, and used proceeds from asset fire sale to finance the retrenchments. Within months, the business returned to positive cash flow.
The creditors rejected the original business rescue plan, insisting that practitioners remain involved until the restructuring was concluded. This marked the first instance where creditors demanded the ongoing involvement of an independent party for me, a trend that would become more common in future business rescues. The business rescue plan was published to creditors in terms of Section 150 of the Companies Act of South Africa, and the practitioners filed for substantial implementation in October 2016.
The business was successfully rehabilitated and continues to operate today, having learned valuable lessons from the process.
Not all entrepreneurs are equipped to navigate the intricacies of the corporate world. However, with guidance and tools like business rescue, these entrepreneurs can become leaders in their field, and their businesses can be given the opportunity to prosper.