Financial Data
Updated 15 Oct 2019


Getting back on track

According to statistics from the United States' Small Business Administration, 51% of new employer establishments survive at least five years - a far cry from the previous long-held belief that 95% fail in that period. For local businesses that do struggle, however, the new companies Act offers some relief. This short summary explains why.


02 April 2012  Share  0 comments  Print


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One of the more innovation aspects of the new Companies Act of 2008 is the Business Rescue Scheme, which is designed to help floundering companies get back on their feet rather than liquidating them or placing them under judicial administration.

Any affected person (employees, management or even a trade union active in the company) can apply to court to place a company under "business rescue", if they feel there is sufficient reason to believe that the company can be worked back into shape.

Once in business rescue, a company can continue trading but with a moratorium on most legal proceedings against them. In other words, suretyships or guarantees cannot be enforced, nor can someone repossess property (for example, motor cards) held by the company during this time.

Once a business rescue application is approved, a practitioner is appointed by the court to formulate a plan that includes proposals for rectifying the financial distress, plus any conditions that must be met.

Once reviewed, amended and approved by all affected parties and company management, this plan is binding. The practitioner also takes over the management role of the organisation. If, at any time during this process it becomes evident that the business is beyond saving, then it will go into liquidation.

How this affects you

Simply put - the business rescue plan provides support and breathing room to get a struggling business back on track, while holding your creditors at bay. 

Note

This article is a general summary and should not be construed as legal advice or as an exhaustive overview. To download a full copy of the Act, visit http://www.info.gov.za/view/DownloadFileAction?id=98894

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