Frequently Asked Questions

  • Can a company continue its ordinary course of business during Business Rescue?
    • Yes, under the supervision of the Business Rescue Practitioner (BRP), a company can generally continue its operations if it is deemed financially viable and sustainable. The BRP's role includes assessing the company's financial health and approving agreements entered into during the business rescue process. This ensures that the company's activities align with the goals of rehabilitation.

  • Can an affected person send a lawyer to attend the creditor’s meetings on their behalf?
    • Certainly, an affected person can appoint a lawyer or proxy to represent them at creditor's meetings. The proxy must possess a signed Power of Attorney document and a clear understanding of the decisions/votes they are authorized to make. This allows for informed representation and decision-making.

  • Can employees' contracts be terminated during Business Rescue?
    • The Business Rescue Practitioner (BRP) has the authority to terminate employment contracts if it is necessary for the successful implementation of the Business Rescue Plan. This decision must follow specific legal procedures, and a proposed termination of employment contracts must be outlined in the Business Rescue Plan and subsequently adopted before the BRP can enforce such terminations.

  • Can secured creditors be affected by Business Rescue?
    • Yes, secured creditors are indeed bound by the Business Rescue proceedings. However, they retain their security interests, enabling them to enforce those interests with the consent of the BRP. Alternatively, their secured debt may be included in the Business Rescue Plan along with the proposed terms and solutions.

  • Can the Business Rescue Process be terminated?
    • Yes, the Business Rescue Process can be terminated under specific circumstances. If the BRP determines that successful rescue is no longer feasible, provisional liquidation may follow. Termination may also occur if a Business Rescue Plan isn't adopted or if the company's financial distress ends.

  • Do I need to be part of the process if I received a notice of commencement of business rescue?
    • When a company enters business rescue, it is obligated to notify all parties that could be affected by the process. These "affected persons" encompass not only creditors but also any individuals or entities that may be impacted by the company's financial state. It is important to note that participation is not compulsory. If you decide to withdraw from the process, you can communicate your decision in writing to the appointed practitioners overseeing the rescue proceedings.

  • How does Business Rescue affect legal proceedings?
    • Upon commencement of Business Rescue proceedings, legal actions against the company are suspended or "stayed." This protection allows the company to focus on recovery without immediate legal pressures. However, this protection doesn't extend to directors, especially if they've signed sureties.

  • How is a Business Rescue Plan approved?
    • Approval of the Business Rescue Plan involves voting by the company's creditors and shareholders. To be adopted, it requires a 75% majority vote of creditors present at the voting meeting, based on the value of their claims. Shareholders' voting requirements differ; they vote if there's a change in shareholding percentage, with a normal majority (50% + 1) needed for approval.

  • Is it compulsory to attend all creditor's meetings?
    • Attendance at creditor's meetings is not compulsory, and creditors cannot be forced to attend. However, if votes are conducted during a meeting, absent creditors cannot subsequently object to the outcome of the vote due to their absence. This underscores the importance of active participation to influence decisions.

  • Is the business being liquidated/closed?
    • This question often arises due to concerns about the implications of business rescue. However, it's crucial to understand that business rescue primarily focuses on rehabilitation rather than liquidation. It demonstrates a proactive decision by a company's directors to acknowledge financial distress and take responsible steps to address it. This process aims to secure the best possible outcome for all parties involved and steer the company toward recovery.

  • What happens if the Business Rescue Plan is approved?
    • Once the Business Rescue Plan is approved, it becomes binding on all parties, including creditors and shareholders. The company operates under the plan's proposals, with the BRP overseeing its implementation. Substantial Implementation is filed when plan objectives are met, marking a successful turnaround.

  • What happens if the company incurs new debts during Business Rescue?
    • New debts incurred during Business Rescue, subject to written approval by the BRP, are treated as post-commencement finance. These new debts often receive preferential treatment and hold a higher priority compared to pre-commencement debts when it comes to repayment.

  • What if the Business Rescue Plan fails to revive the company?
    • If the Business Rescue Plan does not achieve the intended recovery, the company may be placed into liquidation. In this scenario, the company's assets are sold to settle debts as far as possible. Business Rescue aims to prevent this outcome whenever feasible, making revival the priority.

  • What is a Business Rescue Plan?
    • A Business Rescue Plan is a comprehensive document outlining strategies and actions for addressing a company's financial distress, restructuring its debt, and improving its overall operations. It serves as a roadmap for rescuing and rehabilitating the company while considering the interests of affected parties.

  • What is Business Rescue?
    • Business Rescue is a legal process in South African law aimed at assisting financially distressed companies in recovering from financial difficulties and avoiding liquidation or closure. Its primary objective is to facilitate the rehabilitation of a company's financial affairs, assets, and operations, at minimum ensuring that affected parties receive a better return compared to what they would receive in an immediate and traditional liquidation scenario.

  • What is the role of a Business Rescue Practitioner (BRP)?
    • A Business Rescue Practitioner (BRP) is appointed to oversee and manage the Business Rescue process. They hold the authority to assume control of the company, develop a comprehensive Business Rescue Plan, and make decisions aimed at restructuring the company's operations and finances. The BRP's role is high-level, involving certain management functions while collaborating with existing management to ensure continuity.

  • When can a company enter Business Rescue?
    • A company can enter Business Rescue when it is financially distressed, unable to pay its debts, or is reasonably likely to become insolvent within the upcoming six months. Importantly, the company must also demonstrate a reasonable prospect of successful rescue, showing that the objectives of business rescue can be achieved through the process.

  • When will I get the money owed to me?
    • The timing of creditor payments during Business Rescue can vary due to the intricacies of the process. Practitioners work diligently to resolve matters efficiently, but early in the process, it's challenging to provide exact payment timelines. Submitting a proof of claim form ensures inclusion in the rescue plan.

  • Who can initiate Business Rescue?
    • Business Rescue proceedings can be initiated by different parties, including the company's board of directors through a voluntary resolution, a creditor, a shareholder, or a registered trade union representing employees. Additionally, the court has the authority to, on application, order business rescue if it finds that the company is in financial distress and should undergo the process.