Johannesburg – Delays in court hearings for business rescue applications end up costing money and the eventual failure of a business rescue plan, according to an expert.
Speaking at a seminar on financial restructuring and insolvency, at Norton Rose Fulbright on Wednesday, director Haroon Laher laid out the case for a specialist court to deal with business rescue issues.
Laher explained that a specialist court will help develop the maturity of the restructuring sector, as is seen in the US where there is a NY Bankruptcy court.
He said that current legislation provides the foundation for a specialist court of this nature to be set up. “We need it for the sake of consistency.” Laher explained that having one judge sitting on business rescue matters and delivering judgments will provide the consistency.
Secondly, a specialist court will assist in avoiding the delays that come with ordinary court processes. With delays, money is lost. He used an example of how a postponement of an application for six months would have ultimately signalled the end of the debt restructuring process and the business.
An application would be made in the case where the required majority (75%) of votes in favour of a business rescue plan was not reached, he explained. Currently within the legal systems this process could take six months.
Laher used an analogy of business rescue as a bubble for the business, but the bubble has limited breathing space. If air is lost, which is the delay caused either by lack of funding or other reasons, the business rescue plan will be lost and the business will end up in a process of liquidation, he explained.
Laher poked holes at existing judgments made regarding business rescue where ill-informed decisions were made. He added that the existing judgments also did not consider jurisprudence from an international perspective. Some of the judgments were “short and crisp”, without reference to how internationally these issues are dealt with.
Business rescue practitioner, Peter van den Steen who was speaking during a panel discussion, explained that a specialist court would deal with issues urgently and make decisions immediately. “Every day lost in making decisions regarding business rescue is costing money,” he said.
If a specialist court is introduced then equally it must be considered if there is capacity to implement it, he said.
Business rescue practitioner, Dawie van der Merwe, who was also on the panel, reiterated that a specialist court would deal with matters urgently. A specialist court would have the competency to deal with matters expeditiously, but whether it is achievable to establish one remains in question, he said.
The major problem is that the judiciary first has to recognise that a specialist court is a core requirement for the structure to be set up.
Tokelo Moloi, who represented lenders, also supported the idea of a specialist course. He explained that in the same way there is an intensive care unit at hospitals, a specialist court should be set up to deal with business rescue.
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