Business rescue can be a viable option for a company that has fallen on tough times but has the potential to right itself again. This is where business rescue can assist a business and provide the necessary time and support for it to recover.
Sections 150 to 154 of the Companies Act 71 of 2008 deals with the development and approval of a business rescue plan by a business rescue practitioner appointed by the company, and is fundamental to the business rescue proceedings. To explain the business rescue process, I will break down each of these important sections:
Section 150 sets out the framework for a business rescue plan, and what it must include, namely:
- a background on the company, operations and current financial position;
- proposals highlighting how the business rescue practitioner intends to ‘rescue’ the company;
- assumptions and conditions that the business practitioner makes in respect of the company.
This business rescue plan must be published by the company within 25 business days after the date on which the business rescue practitioner was appointed, or such longer time as may be allowed by the court or the holders of a majority of the creditors’ voting interests. Within 10 business days after publication the business rescue practitioner must convene a meeting of the creditors and other relevant stakeholders to consider the published business rescue plan and either accept or reject it.
The published business rescue plan will be approved on a preliminary basis if it is supported by the holders of more than 75% of the creditors’ voting interest that voted and if such votes in support of the proposed business rescue plan also includes at least 50% of the voting interests of any independent creditors’ that voted.
In the event that the published business rescue plan is adopted such business rescue plan will be binding on the company, every holder with a voting interest, and each creditor of the company, irrespective of whether or not such persons were at the meeting and/or voted in favour of the business rescue plan, or in the case of creditors, had proven their claims against the company.
In the event that the published business rescue plan is rejected the business rescue practitioner may either seek a vote of approval from the holders of voting interests to prepare and publish a revised business rescue plan, or inform the persons at the meeting that the company will approach the court to set aside the result of the vote on the ground that it was inappropriate.
However, should the business rescue practitioner not take any such action, any affected person present at the meeting may seek a vote of approval from the holders of voting interests to prepare and publish a revised business rescue plan, or approach the court themselves to have the result of the vote set aside on the ground that it was inappropriate.
From the above it should be clear that the preparation and adoption of a business plan is an encompassing and specialist process intended to ensure that all stakeholders of the company agree on a way forward to help an ailing company get back on its feet.
Should the option of business rescue appear appropriate for your business, we would advise that you consult with your attorney to assist your company to take the next steps towards business rescue.