Example: stock market

A Guide to Business Rescue Prepared by …

A Guide to Business Rescue Prepared by werksmans AttorneysA Guide to Business Rescue Prepared by werksmans AttorneysA Guide to Business Rescue1. An introduction to werksmans approach to Business rescueRestructuring of companies in financial distress is on the increase globally. In line with this trend, Chapter 6 of the new Companies Act, No. 71 of 2008 introduces Business Rescue to the South African Business landscape. South African companies which are financially distressed or which trade in insolvent circumstances in South Africa now have an opportunity to reorganise and restructure. This has far reaching effects on creditors, financial institutions, shareholders, employees and restructuring members of the werksmans Business Rescue and Insolvency team have carefully considered the new legislation and the manner in which Business Rescue proceedings are to be implemented.

A Guide to Business Rescue Prepared by Werksmans Attorneys The long anticipated new Companies Act No. 71 of 2008 (“the Act”) was promulgated in …

Tags:

  Business, Attorney, Secure, Prepared, Business rescue prepared by, Werksmans, Business rescue prepared by werksmans attorneys

Information

Domain:

Source:

Link to this page:

Please notify us if you found a problem with this document:

Other abuse

Transcription of A Guide to Business Rescue Prepared by …

1 A Guide to Business Rescue Prepared by werksmans AttorneysA Guide to Business Rescue Prepared by werksmans AttorneysA Guide to Business Rescue1. An introduction to werksmans approach to Business rescueRestructuring of companies in financial distress is on the increase globally. In line with this trend, Chapter 6 of the new Companies Act, No. 71 of 2008 introduces Business Rescue to the South African Business landscape. South African companies which are financially distressed or which trade in insolvent circumstances in South Africa now have an opportunity to reorganise and restructure. This has far reaching effects on creditors, financial institutions, shareholders, employees and restructuring members of the werksmans Business Rescue and Insolvency team have carefully considered the new legislation and the manner in which Business Rescue proceedings are to be implemented.

2 This includes advising on the manner in which companies should file for Business Rescue proceedings; the appointment of Business Rescue practitioners to supervise Business Rescue proceedings; as well as the duties and liabilities of all parties involved in the Business Rescue purpose of Business Rescue is to maximise the likelihood of the company continuing in existence on a solvent basis. The key to Business Rescue will be the successful development and implementation, if approved by creditors, of a Business Rescue plan to Rescue the company by restructuring its affairs, Business , property, debt, other liabilities and equity. In the event that this is not possible, the implementation of a Business Rescue plan should result in a better return for the company s creditors or shareholders than would result from an immediate liquidation of the Guide attempts to assist directors and creditors and sets out a broad overview of Business Rescue proceedings and the sections of the Act which will affect companies in financial distress.

3 We further provide a flow chart of Business Rescue proceedings with the time periods required by the legislation in the implementation of the process. We provide a Business Rescue and insolvency checklist which highlights the importance of when to apply for either Business Rescue or alternatively liquidation. The impact this decision will have on director s personal liability is also addressed and in particular, the consequences of directors trading a company recklessly, in a position of financial distress or in insolvent Guide to Business Rescue Prepared by werksmans AttorneysThe long anticipated new Companies Act No. 71 of 2008 ( the Act ) was promulgated in April 2009 and became effective on 1 May 2011. The Act fundamentally re-writes South African company law and accordingly will have far reaching effects. Chapter 6 of the Act, which deals with Business Rescue and compromises with creditors, effectively replaces the existing judicial management provisions of the old Companies Act No.

4 61 of 1973 ( the old Act ), with a modern Business Rescue regime. Business Rescue means proceedings to facilitate the rehabilitation of a company that is financially distressed1 by providing for the temporary supervision of the company and of the management of its affairs, Business and property, as well as a temporary moratorium on the rights of claimants against the company or in respect of property in its Business Rescue process culminates in the development and implementation, if approved, of a plan to Rescue the company by restructuring its affairs, Business , property, debt and other liabilities, and equity. The Business Rescue plan s objective is to maximise the likelihood of the company continuing in existence on a solvent basis. In the event that this is not possible, the implementation of a Business Rescue plan should result in a better return for the company s creditors or shareholders than would result from the immediate liquidation of the terms of Chapter 6 of the Act, Business Rescue proceedings ( BRP ) are largely self administered by the company under the independent supervision of an appointed Business Rescue practitioner ( practitioner ).

5 The entire process is also subject to 2. Overview of Chapter 6 of the Companies Act of 2008 Chapter 6 of the new Companies Act introduces proceedings to rehabilitate companies that are financially distressed. The aim is to maximise the chances of these companies continued existence. 1 Financially distressed means that it appears reasonably unlikely that a company will be able to pay all of its debts as they fall due and payable within the immediately ensuing six months or it appears reasonably likely that a company will become insolvent in the immediately ensuing six In terms of s 128(1)(a), an affected person in relation to a company includes creditors of the company. 3 Where a number of days is prescribed, it shall consist only of Business days ( days other than Saturday, Sundays and public holidays).

6 Court intervention by way of application by any affected person ( creditor, shareholder, employee or trade union).The interests of these affected persons are recognised and their participation in the development and approval of a Business Rescue plan is extensively provided for. This brief identifies and elucidates upon specific sections of Chapter 6 which are applicable to creditors as affected persons 2 during of relevant sectionsss 129 and 130 Company resolution to begin BRP: If a company is financially distressed and there appears to be a reasonable prospect of rescuing the company, the board may pass a resolution to voluntarily begin BRP and appoint a practitioner. Notice of such a resolution and appointment must be sent to all affected persons. It is important to note that a company which has adopted a resolution to begin BRP is prohibited from thereafter adopting a resolution to begin liquidation proceedings.

7 After the adoption of such a resolution, but before the adoption of a Business Rescue plan, an affected person may apply to a court with the requisite jurisdiction for an order setting aside the resolution; setting aside the appointment of the practitioner; or requiring the practitioner to provide security to secure the interests of the company and any affected persons. The resolution may be set aside in the event that there is no reasonable basis for believing that the company is financially distressed; there is no reasonable prospect for rescuing the company; or the company failed to satisfy the procedural requirements in relation to the adoption of such resolution. The appointment of a practitioner may be set aside on the following grounds: the practitioner is not suitably qualified to hold such a position; the practitioner is not independent of the company / management; or the practitioner lacks the necessary skills.

8 In terms of an application brought by an affected person - a copy of such application must be served on the company and the Companies and Intellectual Property Commission ( Commission ), and each affected person must be duly notified. It is important to note that each and every affected person has the right to participate in the hearing of such 131 Court order to begin BRP: In the absence of a resolution to voluntarily begin BRP, an affected person may apply to the court at any time for an order placing a company under supervision and thereby commencing BRP. A copy of such an application must be served on the company and the Commission and each affected person must be duly notified. At the hearing of the application, the court may make an order placing the company under supervision and commencing BRP. This order may only be granted if the court is satisfied that the company is financially distressed; or has failed to pay any amount in terms of an obligation in relation to employment matters; or it is otherwise just and equitable to do so for financial reasons; and there is a reasonable prospect of rescuing the company.

9 A Guide to Business Rescue Prepared by werksmans Attorneys In terms of such court order, an affected person would appoint a practitioner to supervise the BRP. The court may dismiss the application and place the company under liquidation. If the court grants an order placing the company under supervision and commencing BRP, the court may appoint an interim practitioner nominated by the affected person who brought the application. However, such nomination is subject to the approval of the holders of a majority of the independent creditors voting interests at the first meeting of creditors. If liquidation proceedings have already commenced at the time an application for BRP is brought, such application will suspend those liquidation proceedings until the court has adjudicated upon the application or until the BRP ends.

10 In addition, the court may make any of the above-mentioned orders at any time during the course of any liquidation proceedings or proceedings to enforce any security against the company. s 133 General moratorium on legal proceedings against a company: Subject to certain exceptions (listed below), during BRP, no legal proceeding, including enforcement action, against a company, or in relation to any property belonging to the company, or lawfully in its possession, may be commenced or proceeded with in any forum. Note: Creditors such as Banks which hold general notarial bonds would have to apply to a court to perfect such bonds - to a lawful pledge - prior to the commencement of BRP. Exceptions: with the written consent of the practitioner; with the leave of the court; as a set-off against any claim made by the company in any legal proceedings; criminal proceedings against the company / its directors; proceedings concerning any property / right over which the company exercises the powers of a trustee; or proceedings by a regulatory authority in the execution of its duties.


Related search queries