Business Rescue – yes or no?

• Is unlikely to be able to settle all of its debts as they become due, within the immediately ensuing 6-month period (i.e. it is “commercially insolvent”)
• Is likely to become insolvent within the immediately ensuing 6-month period (i.e. it is “factually insolvent”)

• The business rescue practitioner assumes oversight of the company operations and has full management control over the company in substitution of the Board of Directors and pre-existing management.

• Required to co-operate with and assist the business rescue practitioner in servicing the rescue process.
• Can be removed from office if their actions impede or in any manner frustrate the rescue process.
• Remain accountable for decisions taken affecting the business prior to the commencement of the rescue process.

• Terms and conditions of employment in effect prior to the commencement of the rescue process remain in effect, except to the extent that such conditions are changed in accordance with labour legislation (including retrenchment and restructure) as a consequence of the rescue process.

• Although the intention is that the company in rescue continues to operate as prior thereto, except that it is under management of the business rescue practitioner, it is in practical terms unlikely to be a case of “business as usual” as unsecured creditors are at risk of supplying goods or services without compensation.
• It is wise to ensure that the agreement between a creditor and its customer regulates dealings in the event of insolvency or business rescue.

• Classification or status of listed securities, other than by way of a transfer of securities in the ordinary course of business, is invalid unless directed as such, as a consequence of the business rescue proceedings.

Before commencing on a business rescue process, it is important to understand how your business could be impacted by this decision and equally if your company serves another suspected of entering rescue proceedings. Whereas your rights are determined by legislation, there are practical considerations.

If business rescue is on your horizon, although the MMS Group does not serve in a practitioner capacity in business rescue matters, our Management Consulting team can assist you in making the decision that will best serve the interests of you as an affected party. Reach our team through our website.

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