Business Rescue

The new Companies Act has introduced the concept of business rescue for financially distressed companies. Simply put: this is a way to save companies from becoming bankrupt and applies to all types of businesses including close corporations.

The business rescue process commences when a business finds itself financially distressed and potentially facing bankruptcy. The company may decide to start the process of business rescue or it may be by order of the court. A form CoR 123.1 must be submitted and the resolution will only have force once the notice has been filed with the Commissioner.

The notice must be published to every affected person within 5 days after:

• It has been filed, in case of a resolution or
• The date of the court order, in such a case.

Appointment of Business Rescue Practitioner

• The business rescue practitioner is appointed using a form CoR 123.2. The notice of the appointment of a business rescue practitioner must be published to every affected person within 2 days after it has been filed or 5 days after the court order.
• The fee for filing the notice is R80.

If the notice is issued following a board resolution:

• The CC must appoint a business rescue practitioner within 5 days after filing this notice; and
• Any affected person may apply to a court in terms of section 130 of the Companies Act for an order setting aside the resolution.

"affected person" in relation to a company means

1. a shareholder or creditor of the company;
2. any registered trade union representing employees of the company; and
3. If any of the employees of the company are not represented by a registered trade union, each of those employees or their respective representatives.

If the notice is issued following a CC appointment:

• Any affected person may apply to a court in terms of section 130 for an order setting aside the appointment, or requiring the practitioner to provide security

If the CC decides not to proceed with business rescue, a form CoR 123.3 needs to be completed and a notice must be published to every affected person within 5 business days after the board has considered the matter. An affected person has the right in terms of section 131 of the Act to apply to the court for an order placing the CC into business rescue.

Once business rescue proceedings are under way a business rescue status report must be given via form CoR 125.1. The first status is expected at the end of the first three months of the business rescue proceedings, and at regular monthly intervals thereafter.

The notice must be published to every affected person and to:

• The Commission, if the business rescue proceedings were started by the CC
• The court, if the proceedings were ordered by the court.

The prescribed form for notice of termination of business rescue proceedings is a CoR 125.2, which must be filed with the Commission and must be published to every affected person.

Form CoR 125.3 is a notice of substantial implementation of a business rescue plan and must be filed with the Commission.