Why business rescue practitioners get a bad rap

Johannesburg- Business rescue should be about ensuring the survival of a business, and not be seen as an opportunity for the business rescue practitioner to make a profit, experts said.

During a seminar on financial restructuring at Norton Rose Fulbright on Wednesday, experts in the field discussed the reasons for the negative sentiment towards the practice.

Haroon Laher, senior restructuring and insolvency lawyer at Norton Rose Fulbright, posed the question about the negative sentiment to a panel which consisted of business rescue practitioners and a lender.

Tokelo Moloi, who represented lenders, said that often creditors want to get the most out of the process, considering their pockets instead of the objective of business rescue. Retaining jobs and keeping the company going should take priority over returns, he explained.

Business rescue should not be about getting a better return for creditors, but rather saving a business for the good of the economy.

Moloi said there was negativity towards business practitioners, as businesses put their faith in business rescue plans when the process had just started. Subsequently, businesses suffered major losses, while the practitioners had earned huge margins. Rescue plans ultimately failed and the businesses went into liquidation. 

The practice of business rescue should be designed to “heal” businesses.  “I don’t think people doing business rescue see it properly," Moloi said. "They see it as a business opportunity to make more money.”

Lenders caught onto this and are now against it, he said. Business rescue is no longer achieving its objective and is being abused.

Peter van den Steen, a business rescue practitioner, said that the desired result of a successful plan is to keep the entity operating, and secure jobs. The “second prize” would be a better outcome for businesses than liquidation, which is the last option.

Creditors however inherently act in their own best interest, he said.

READ: Specialist court for business rescue needed – expert

Van den Steen said there is a good side and a bad side to business rescue, but that the industry is still maturing and skills sets are still being developed. He said that professional bodies were still considering licencing the practice of business rescue. 

The industry is still in early stages but efforts should be made to make it work, Van den Steen said. The impact of successful business rescue is significant for the economy, especially in the jobs space, he said.

Dawie van der Merwe, also a business practitioner, said that the industry, like many others, requires checks and balances.  If there are no checks and balances, there will be abuse, he explained.

He said that although legislation in the area may be poor, the system is still "brilliant" and workable. 

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