Transcription
THE 7 STEPSTO BUSINESSRESCUE
STEP1: BOARD RESOLUTIONThe board of a company may resolve that the companyvoluntarily begins business rescue proceedings and beplaced under supervision if there are reasonable groundsto believe that: the company is in financial distress; and a reasonable prospect of rescuing thecompany exists.Note: A resolution may not be adopted if liquidationproceedings have been initiated by or against the companyand such a resolution, if taken, shall have no force or effect.Note: An affected person may also make a formalapplication to court for an order placing a company undersupervision and into business rescue proceedings.
STEP 2: APPOINTMENT OF THE BUSINESS RESCUEPRACTITIONERWithin five business days after having adoptedand filed a resolution, the company must: publish the notice of the resolution and its effective datein the prescribed manner to every affected person; and appoint a business rescue practitioner (“BRP”) who satisfiesthe requirements of section 138 of the Companies Act(“the Act”) and who has consented, in writing, to acceptsuch an appointment.After appointing a BRP, the company must: file a notice of appointment of a BRP within two businessdays after making the appointment; and publish a copy of the notice of appointment to eachaffected person within five business days after the noticewas filed.If a company fails to comply with these steps timeously,its resolution to begin business rescue proceedings lapsesand will be regarded as a nullity. The company maythen not file a further resolution for a period of threemonths after the date on which the lapsed resolutionwas adopted (unless a court application approves thefiling of a further resolution).
STEP 3: CREDITORS’ MEETINGWithin ten business days after being appointed, the BRP mustconvene and preside over a first meeting of creditors andemployees’ representatives at which: the BRP must inform the creditors/employees’representatives whether he/she believes that there is areasonable prospect of rescuing the company and mayreceive proof of claims by creditors; and the creditors/employees’ representatives may determinewhether or not a committee of creditors/employeesshould be appointed and if so, may appoint the membersof the committee.At any time after the adoption of a resolution and until theadoption of a business rescue plan, an affected person mayapply to court for an order: Setting aside the resolution on the grounds that: there is no reasonable basis for believing that thecompany is financially distressed; there is no reasonable prospect of rescuing the company; the company has failed to satisfy the proceduralrequirements under section 129 of the Act. Setting aside the appointment of a BRP on the grounds that: he/she does not satisfy the requirements; he/she is not independent; and/or he/she lacks the necessary skills.
STEP 4: PROPOSAL OF THE BUSINESS RESCUE PLANThe BRP, after consulting the creditors and otheraffected persons, must prepare a business rescue planfor consideration and possible adoption. The plan mustcontain, inter alia, the following: Part A – Background Part B – Proposals Part C – Assumptions and conditionsThe business rescue plan must be published by the companywithin twenty five business days after the date on which theBRP was appointed.Within ten business days after publishing the business rescueplan, the BRP must convene, and preside over, a furthermeeting of creditors for purposes of considering the plan.STEP 5: VOTE ON THE PROPOSED BUSINESSRESCUE PLANAt least five business days before the meeting contemplatedabove is convened, the BRP must deliver a notice of themeeting to all affected persons setting out: the date, time and place of the meeting; the agenda for the meeting; a summary of the rights of affected persons to participatein the meeting.The business rescue plan will be introduced tothe creditors during the meeting and will eitherbe approved or rejected based on the creditor’svoting interest.
STEP 6: IMPLEMENTATION OF THE BUSINESSRESCUE PLANIf a company’s business rescue proceedings havenot ended within three months after the start ofthose proceedings, the BRP must prepare a reporton the progress of the business rescue proceedingsand send an update to the affected persons atthe end of each subsequent month until the end ofthose proceedings.During business rescue proceedings no legal proceedings,including enforcement action against the company or inrelation to any property belonging to the company or lawfullyin its possession may be commenced or proceeded withinany forum except: with written consent by the BRP; with leave of the court; as a set-off against any claim made by the company inany legal proceedings; criminal proceedings against the company or any of itsdirectors; proceedings concerning any property or right ofwhich the company exercises the powers as atrustee; or proceedings by a regulatory authority inthe execution of its duties after writtennotification to the BRP.
STEP 7: END OF BUSINESS RESCUE PROCEEDINGSBusiness rescue proceedings come to anend as follows: by way of a court order; by way of termination by the BRP in the event that the business rescue plan has been adoptedby the creditors, the BRP will file a notice of substantialimplementation of the plan with CIPC. Once this noticeis filed the company is no longer in business rescue. Theapproved plan, however, stays in effect and the companymust perform in terms thereof and the creditors are bound byit; or in the event that the business rescue plan is rejected by thecreditors and no affected person has acted to extend theproceedings, or the practitioner concludes that there areno reasonable prospects for the company to be rescued,the practitioner must inform all affected persons and applyto the court for an order discontinuing the business rescueproceedings and placing the company into liquidation.
THE BANKING, CONSTRUCTION& INSOLVENCY LAW TEAMLEANDER OPPERMANPartnerPHONE 27 12 432 6117EMAIL leander.opperman@adamsadams.comVUYOKAZI NDAMSESenior AssociatePHONE 27 12 432 6482EMAIL vuyokazi.ndamse@adamsadams.comMELISSA DREYERAssociatePHONE 27 12 432 6133EMAIL melissa.dreyer@adamsadams.com
Business rescue proceedings come to an end as follows: by way of a court order; by way of termination by the BRP in the event that the business rescue plan has been adopted by the creditors, the BRP will file a notice of substantial implementation of the plan with CIPC. Once this notice is filed the company is no longer in business rescue.
