Restructuring 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 (the Act) 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 specialists.

The members of Werksmans substantial Business Rescue and Insolvency team have carefully considered the new legislation and the manner in which business rescue proceedings are to be implemented. 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 process.

The 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 company.

Werksmans is able to advise business rescue practitioners, directors, stakeholders, employees and creditors during all stages of the business rescue process. This includes providing guidance to creditors in respect of strategic decisions (such as whether or not to vote in favour of a business rescue plan or whether or not to embark on the winding up process as an alternative to business rescue) and advice on protecting their security, particularly when it comes to financing and lending transactions in the business rescue scenario.

Speed is of the essence in the business rescue process. Very short time periods are set out in the Act and it is important that all stakeholders have proper legal support to call upon at short notice.

Werksmans approach to business rescue is proactive and focuses on advising creditors in a way that ensures that they achieve maximum returns in the business rescue process.

If business rescue is not recommended, or fails, members of the Werksmans Business Rescue and Insolvency team are able to assist directors, stakeholders, liquidators and creditors during the liquidation process. This includes advising on the commencement of winding-up proceedings as an alternative to litigation and providing support in the conduct of insolvency enquiries.

In insolvency matters, cross-border recovery skills are key. The team’s expertise in this field extends into African countries and international jurisdictions, with proceedings having been successfully instituted in many countries around the world. 

BUSINESS RESCUE & INSOLVENCY SERVICES: