Business Rescue proceedings are incorporated into the new Companies Act of 2008 and have two goals as defined in the act.
The first goal is to rescue the company so that it can continue in existence. If this is not possible, the second goal is to provide the company’s creditors or shareholders with a better return than what they would receive if the company was immediately liquidated.
I believe that the main aim of including Business Rescue proceedings into the South African legal landscape is to, and should always be, to ensure that the business can continue as a sustainable business adding value to the economy.
The moment that this is achieved the benefits are enormous. Jobs of employees are saved, income is generated for many households, and in many cases for the lower-income groups, SARS continues to collect taxes from a viable entity and suppliers continue to do business and retain a customer.
Yes, in some instances employees are retrenched, but this entails that some employees continue to have a job and only a minority might have to be unemployed for a while.
Yes, some suppliers are replaced with other suppliers, but this means that the cash flow wasn’t removed from the economy in total and the economic cycle continues.
As a creditor to a business in business rescue, the aim of the process should never be to punish you as you did your part, you delivered the goods or services at acceptable quality.
Your duty as a creditor should be to understand what the aim of business rescue is and to ensure that the business rescue practitioner does his job, which is to rescue the business.
I believe that the process of Business Rescue is massively abused in South Africa. Businesses which do not have a right to exist anymore, whether for economic or operational reasons, are put into rescue without having real solutions to their problems.
