Business rescue gives troubled firms breathing space - Cape Times June 2016

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BUSINESS rescue legislation has opened many new avenues for underperforming or distressed businesses in South Africa, according to the Turnaround Management Association - Southern Africa (Chapter) (TMA-SA).

“Business rescue is the legal process in which a financially distressed company is given a ‘breathing space’, a moratorium, to organise its affairs, whilst the rights of claimants against the company’s assets are temporarily suspended. It provides an alternative to liquidation,” explains Alastair Macduff, chief executive officer at TMA-SA.

TMA SA article Cape Times page 8 -17 June 2016He says the business rescue is carried out in terms of the Companies Act No 71of 2008 and the Companies Regulations, 2011.

“When a company is in financial distress and cash flow dries up, panic can set in affecting creditors, employees and management. Knowing that the future of the business is in the capable hands of a business rescue practitioner brings a sense of calm to a process that is unfamiliar and seems chaotic and uncertain.”

Once the business rescue resolution has been passed by the board of directors, it means that the company’s affairs and assets are placed under the supervision of a licenced business rescue practitioner who will take over all responsibility from the board of directors and make all future decisions and will attempt to turn the business around.

Macduff says the Companies Act recognises stakeholders such as shareholders, creditors and employees, and calls for their participation in the development and approval of the business rescue plan.

In particular, the act protects the interest of employees, recognising them as creditors of the business.

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