The corporate rescue procedure has the object of facilitating the rehabilitation of a company that is financially distressed.

Should a company realise that it will not be able to pay all of its debts, as they fall due and payable, and that the likelihood of insolvency is reasonable, such a company is able to consider utilising the business rescue procedure in terms of the new Companies Act.

A consequence of entering business rescue proceedings is the implementation of a general moratorium on legal proceedings against the company. This means that no legal proceedings may be instituted by or against the company, unless the permission is obtained from the court or the business rescue practitioner to do so.

There are strict, abridged time periods for the filing of the company resolution (to proceed with rescue procedures), as well as appointing a business rescue practitioner, among others. The directors must believe that the company is financially distressed and that there appears to be a reasonable prospect of the company achieving its goals if a business rescue operation is implemented.  This must be dealt with in an affidavit of one of the directors. The directors must appoint a business rescue practitioner as stated above, who is a person or persons appointed to oversee a company during business rescue proceedings. The company must also file a notice of the practitioner’s appointment with CIPC and every creditor.

Within ten business days after having been appointed, the practitioner must convene and preside over the first meeting of creditors and inform the creditors whether there is a reasonable prospect of rescuing the company.  That is also when the practitioner will receive proof of claims. 

The rescue practitioner must consult with all affected persons (including creditors) before preparing a business rescue plan, in consultation with the stakeholders, in order to seek their input and co-operation in its implementation.

The practitioner, in preparing the rescue plan, will investigate the company’s affairs (business, property and financial situation) and decide whether there is a reasonable prospect of the company being rescued. If this is not achievable, an application will be brought to court for an order discontinuing the business rescue proceedings and placing the company under liquidation.

A business plan will be approved on a preliminary basis if supported by the creditors. A rescue plan that has been adopted is binding on the company and on each of the creditors and shareholders whether or not the person was present at the meeting or not. 

So, the question is what to do now…

The practitioner must be in touch with you (the creditor), and convene a meeting of creditors within 10 days of his appointment, which is where you will either find out that the company will be liquidated, or where you will prove your claim (with your invoices) and then agree on a business plan.

You really only have 2 options here – either agree to the business rescue plan and prove your claim, or reject it and the company will be placed under liquidation.

Business rescue proceedings should typically only last 3 months, however if everything worked as it typically should, we’d all have won the lotto by now…