Business rescue as a remedy

Debt consolidation.
Debt consolidation.
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A Fin24 user whose business is struggling feels like giving up hope. He writes:

I own a small milling company in a rural area. I am struggling due to the volatile pricing of maize.

I have debts of R3.5m. I tried to ride the storm out, but I feel like I cannot any more.

I have become nervous and frightened and even wish I was dead. Every year seems to be a battle. Please help or advise.

Registered Business Rescue Practitioner Advocate Anton Barkenhuizen of Debt Correct responds:

Business rescue (BR) as a remedy was created in terms of Chapter 6 of the New Companies Act 71 of 2008 to assist the backbone of our economy - namely businesses enterprises - to “build a bridge over troubled waters”.  

The act confers a duty on the directors of a company/close corporation to enter into BR, failing which they could encounter liability for any losses that arise as a result of not entering BR.

There are two ways to enter into business rescue proceedings. Firstly, there is a court application (which falls outside the scope of this discussion) and secondly, a resolution taken by the directors of the company or close corporation.

The BR process is relatively new and not complicated, as it is a commercially-based process.

To formalise the process, the distressed company files a resolution to commence BR with The Companies and Intellectual Property Commission, followed by the nomination and appointment of a BRP.

It is important to note that business rescue is a consultative and inclusive process involving all affected people.

All stakeholders are given the opportunity to participate in the consultative process.

The ultimate goal is to reach a commercial and viable solution, culminating in the rescue of the company as well as maximising the likelihood of its continued existence on a solvent basis.

It also aims to provide a better return for the creditors or shareholders than would result from the immediate liquidation of the company.

The process is also characterised by a moratorium period, where liquidation and legal proceedings against the company are suspended.

In all, BR is a definite improvement on its predecessor, judicial management.

If you are considering entering business rescue, don’t wait too long.

Lastly, the choice of your BRP is crucial, because he or she will effectively take control of your business and steer it, with your help, to calm waters.

Finally, fees are prescribed by the Companies and Intellectual Property Commission, but this is not cast in concrete.

Negotiate and endeavour to appoint a BRP that is willing to work on contingency.

- Fin24

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