What is business rescue, in a “nutshell”?

Business rescue, as defined by the Companies Act 2008, aims 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 the property in its possession;
• 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.

How does the business rescue process unfold?

Once a company commences business rescue proceedings either voluntarily (section 129) or by an order of court (on application by an affected person) the following actions are prescribed by the act:

• The practitioner must investigate the affairs of the company as soon as possible after the commencement of business rescue.
• Within 10 business days after being appointed, the practitioner must convene a meeting of the creditors and a meeting of the employees and advise them of the prospects of rescuing the company.
• The business rescue plan, as proposed by the practitioner, must be published by the company within 25 days after the date on which the business rescue practitioner was appointed.
• The business rescue practitioner must convene a meeting of the creditors and any other holders of a voting interest, for the purpose of considering the proposed plan, within 10 business days of the publication of the business rescue plan.

This serves to emphasise that business rescue is an urgent process, even though leeway is granted by the courts on these reporting periods, depending on the size and complexity of a business.

MORATORIUM ON LEGAL PROCEEDINGS

Section 133 of the Act makes provision for a general moratorium on legal proceedings, including any enforcement action, against a company, or any property belonging to a company or lawfully in its possession, while the company is subject to business rescue proceedings.

This moratorium is in order to grant the business rescue practitioner some breathing room while he attempts to rescue the company through the design and implementation of a business rescue plan.