At PATC, we assist with business rescue, which is defined by the Companies Act 2008 with an aim to facilitate the rehabilitation of a company that is “financially distressed,” by providing for:
- the temporary supervision of the company and management of its affairs, business and property by a business rescue practitioner,
- a temporary moratorium (“stay”) on the rights of claimants against the company or in respect of property in its possession and the development and implementation (if approved) of a business rescue plan to rescue the company by restructuring its business, property, debt, affairs, other liabilities and equity.
The term financially distressed is used to indicate a condition when promises to creditors of a company are broken or honoured with difficulty.
If financial distress cannot be relieved, it can lead to bankruptcy. Financial distress is usually associated with some costs to the company; these are known as costs of financial distress.
Practitioners in the Business Rescue field provide their business assistance aimed towards the rehabilitation of companies, allowing them to restructure and reorganise their operations with the goal of returning to a point of financial stability and profitability.
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Business Rescue Can Be Initiated By:
The board of directors;
By an application to court when the business is financially distressed;
Various affected persons by application to court (including shareholders, creditors, registered trade unions and employees).
Appointing a Business Rescue Practitioner
A business rescue practitioner will be appointed within five days after the resolution has been adopted and filed with CIPC to oversee and supervise on a temporary basis the management, affairs and business of the company and to devise, prepare, develop and implement a business rescue plan.
The plan will be implemented if approved by creditors and shareholders to the extent that the rights of the shareholders will be affected.
NB: No liquidation proceedings must have commenced against the company when a decision is taken to start business rescue proceedings.
How to File for Business Rescue with CIPC:
- Complete the CoR 123.1 form;
- Scan and e-mail the completed and signed documents – together with supporting information – to email@example.com
Documents to be Submitted:
- 1 Form (duly completed including and signed by an active director/member as per the CIPC register));
- Customer Code (clearly indicated on the form);
- Certified ID copy of the owner of the customer code;
- Certified ID copy of director/member undertaking the sworn statement;
- A sworn statement which contains inter alia the following information:
- Full name, surname and ID number of a person undertaking the sworn statement;
- Reasons for the resolution to start business rescue proceedings;
- Physical address where most of the business activities in the current financial year were undertaken; and
- All legal proceedings the company or close corporation is involved in (especially proceedings against the company or close corporation), the nature of such legal proceedings and the status thereof (if the company or close corporation is not involved in any legal proceedings such must be indicated as well);
- Letter from the business on its letterhead stating:
- PI Score break down and total (as indicated in Companies Regulation26(2));
- Primary business activities (Industry) undertaken in the current financial year; and
- A Nomination of Business Rescue Practitioner (BRP) with a declaration of his / her independence.
- Resolution by the company or close corporation to start business rescue; and
- Letter from the nominated BRP declaring his / her:
- Capacity to accept the new nomination;
- Independence from the business; and
- Not disqualified as prescribed in the Act.
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