INDUSTRY BODY SUPPORTS THE PRESIDENT’S ATTEMPT TO SAVE THE NATIONAL CARRIER
The Turnaround Management Association of Southern Africa supports the decisive step by President Ramaphosa to place South African Airways into Voluntary Business Rescue in an attempt to turn the seriously distressed national carrier around. This vote of support by the TMA-SA follows the confirmation by the South African Minister of Public Enterprises, Pravin Gordhan, in the early morning hours of this morning, that SAA will be placed into business rescue immediately. First word of this step became public hours before Minister Gordhan’s confirmation by means of a reported letter from the Presidency to Cabinet.
“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, Chapter President and Chairman of the Board of the TMA-SA. “A business rescue practitioner is appointed who then carries out the business rescue in terms of the Companies Act No 71 of 2008 and the Companies Regulations, 2011,” explains Macduff.
Amongst its members, the TMA-SA has more than 65 licenced South African business rescue practitioners. TMA-SA serves as a forum for professionals to promote high standards of practice and foster professional development in the turnaround and business rescue industry while adhering to a strict code of conduct. “The highly-respected South African members of TMA-SA are well positioned to manage a business rescue of this stature and nature,” states Macduff.
“Once the voluntary business rescue resolution has been passed by the board of directors, it means that the control over the company’s affairs passes to the appointed business rescue practitioner. The board of directors still has full legal responsibilities for their past actions and decisions taken but has no operational control of the business whilst it is in business rescue.
“Time is of the essence. A timeous turnaround of the business is in the interest of all involved and in the interest of all South Africans.
“It is important to protect the interests of all stakeholders in this situation. In the case of SAA, this is even more important due to its national profile,” states Macduff. He explains that the Companies Act recognises the involvement of all 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 and recognises them as preferential creditors of the business. Importantly, during a business rescue, SAA will be protected against any claims by creditors and all legal action is halted during the business rescue process. The aim is to put the company on a sustainable financial footing and save jobs. But, if the company cannot be saved, business rescue should ensure a better return for all affected parties, including staff, than would be the case under liquidation,” says Macduff.
“Business rescue therefore provides a breather for the company to stabilise its cash flow, apply new management disciplines and turn the company around without any outside interference – including that from the principal shareholder, the South African Government,” says Macduff. “The business rescue practitioner takes full management control of the company. When business rescue proceedings start, the SAA directors must cooperate fully with the business rescue practitioner and, in addition, provide access to all the books and records.
“A company can only be rescued by the implementation of a business rescue plan that either maximises the likelihood of the company continuing to exist on a solvent basis or that results in a better return to all affected parties than would result from the immediate liquidation of the company. In assessing the SAA position, a critical first step will be to ascertain if there is a reasonable prospect that a plan can be implemented that is likely to achieve one of these results to ensure the survival of the South African national carrier,” concludes Macduff.
MEDIA RELEASE ISSUED WITHOUT EMBARGO BY STONE ON BEHALF OF TURNAROUND MANAGEMENT ASSOCIATION OF SA
JOHANNESBURG, 5 DECEMBER 2019