How to Save Your Financially Distressed Company: Get Expert Help with Business Rescue
Lockdown has not been kind to profits. Hundreds of companies have been forced to liquidate over the past two years because of limited trading hours, limitations on movements, reduced consumer buying power, and more. Several made it through the first wave of lockdown, but due to the slowing economy struggle to stay on the right side of the solvency scale, if your business is also hovering at the edge of the cliff, do not wait until it goes over the side before you take the necessary steps to seek expert help with business rescue.
What You Will Learn in the Next Few Minutes
In this article, we provide insight to expert help with business rescue, how it works, what the requirements are, and when it is better to liquidate. Business rescue operations have not been welcomed in the past because of many failed attempts, but even with a small percentage of companies able to return to solvency, it is worth the effort if a company qualifies. With expert help, the potential for success with it increases. If your company is on the verge of bankruptcy, do not despair, as expert help is available. Read on to find out if and how it can be saved.
What is Business Rescue?
It is the process whereby a company in financial distress is rehabilitated to ensure it can keep its doors open, keep its people employed, and be able to grow. With expert help, it is possible and a viable alternative to company liquidation.
When is a Company Financially Distressed?
If the company is likely not to be able to pay its debts when these become due immediately or within the next six months from the assessment, then it meets the first requirement. It also qualifies if it is on the brink of insolvency or most likely to be insolvent within six months. See more about the test for business rescue here and complete the form for immediate expert guidance to reclaim your spot in the marketplace.
Why Not Just Try and Trade Out of the Situation?
The Companies Act prohibits a company from trading if it is insolvent. If the company’s liabilities exceed its assets and the company is unable to pay its debts, and meet obligations such as the payment of salaries, it is both capital and cash-flow insolvent. It must, by law, stop trading. If the directors do not take steps to bring it back to solvency as through expert help with business rescue, a compromise with its creditors, or opting for liquidation, they can be held responsible for the debts.
It is considered reckless trading if they continue to trade when the company is in such financial distress. Given this scenario, if your company is in financial distress, you have an obligation to seek expert help with business rescue, compromise, or voluntary liquidation. Complete this liquidation assessment to determine if voluntary liquidation is a suitable option for your company.
What About the CIPC Notice Issued During the COVID-19 Lockdown?
True, CIPC issued a notice to indicate that penalties will not apply to companies that continue to trade when in financial distress during the COVID-19 lockdown period. However, there comes a cut-off point where ongoing trading puts the entire supply chain at risk, in addition to the wellbeing of employees. But the CIPC notice gives your company the opportunity to return to the board with expert business rescue help. Reach out to our experienced attorneys for help in this regard.
What is the First Step?
If your board of directors determined that your company is in financial distress, you need to decide whether or not there is a reasonable chance that the company can be rescued with expert help or, if with such expert help, it would be possible to come to a reasonable compromise with the creditors and shareholders that would provide them with a better prospect for getting what is due to them than would be the case if your company opted to liquidate. We understand that this can be a difficult decision, best done with expert help in assessing the various outcomes. To this end, reach out for assistance or complete the liquidation assessment form to gain insight as to the company’s best options.
What Is Next if You Decide Not to Enter Business Rescue?
Remember the issue of reckless trading? To avoid penalties, you must then give a written notice to each affected person to state the reasons for not entering business rescue. Affected persons include creditors, shareholders, employees, and registered trade unions.
Keep in mind that the notice should not be taken lightly. You basically inform the affected persons that the company is in financial trouble. Consequences can range from creditors not likely to renew credit or extend credit agreements, labour unions taking to protests and strikes, employees resigning, and negotiations for finance to rescue the company may fail. Any of the affected persons can then apply to have the company placed under business rescue.
What if the Board Decides to Proceed with Business Rescue?
The resolution to the effect must then be submitted to the CIPC to put it into working. The forms and procedures are available from the CIPC. When you make use of our expert help, our attorneys will obtain the forms, guide you regarding the procedures, and will handle the process on your behalf.
Once the proceedings start, a business rescue practitioner is appointed. The practitioner takes over the managerial responsibility of the company. The board of directors effectively gives control over to the practitioner. The company management continues as normal, but the practitioner is in control. The practitioner is tasked with the assessment of the company’s financial affairs, development and implementation of a rescue plan, and reporting on the progress. The aim is to bring the company back to a state of solvency. The practitioner can remove people from company management positions and appoint others.
If the practitioner, at any stage, realises that the company cannot be rescued, a notice to the effect must be given to court and affected persons. Business rescue is an urgent process. As such, time limitations apply, but where needed, the practitioner can request for more time.
Do All Companies Qualify?
Not all businesses can enter the process. For one, sole proprietorships, partnerships, and co-ops do not qualify and should seek expert help on alternative solutions. The company can be in too deep trouble to return to a state of solvency. In this instance, voluntary liquidation is the better option. Visit our liquidation page for more information. In some instances, the sale of the company can solve the problem.
How to Proceed
If your company is in financial distress, take the responsible step to get expert help with business rescue, compromise, or liquidation. It may be difficult to objectively assess your options. Having legal guidance can help you to come to the best decision for your company and affected persons.
Do not delay in solving the problem. You can have support to get through this. Call on our experienced attorneys for professional assistance. We are here for you and have a proven track record of helping clients through liquidations, compromise negotiations, and business rescue operations. Our law firm specialises in insolvency proceedings. As such, we have the resources, expertise, and good standing to help your firm to effectively deal with the financial distress situation.
Disclaimer: This article is for information purposes only and does not constitute legal advice. Call on our attorneys rather than relying on the information herein to make any decisions. The information is relevant to the date of publishing.
