Abstract
Business rescue proceedings attempt to rehabilitate businesses that are in financial distress. In spite of its importance, there is a seemingly low rate of success of the current business rescue regime (at just 15% as at June 2016). This article seeks to understand the issues that may be hindering the current rate of success of business rescue proceedings and provides practising accountants (in their capacity as business rescue practitioners) with a better understanding of the issues surrounding business rescue attempts. This will allow them to better perform their duties and give corporates in need of rescue a fighting chance. Through the use of qualitative interviews, the research findings show that there is a lack of clarity of the definition of success, which may be cause for concern. However, in the view of practitioners, the success rate is expected to improve with time. This study provides details on a few key insights into business rescue practices in South Africa, namely, the practitioners’ perceptions of success, their perceptions of the trust of stakeholders during the course of business rescue, their perceptions of the impact of the qualifications and experience of the business rescue practitioner, and their perceptions on the preparation of the business rescue plan.
Highlights
Business rescue proceedings attempt to rehabilitate businesses that are in financial distress and provide them with an alternative to liquidation (Companies Act No 71 of 2008, s128[1][b])
It is apparent that business rescue proceedings are, in the present state, not very successful, even when success is only measured by the substantial implementation of the business rescue plan
It is vital that an understanding be gathered on the issues that may be hindering the current rate of success to allow corporates in need of rescue a fighting chance
Summary
Business rescue proceedings attempt to rehabilitate businesses that are in financial distress and provide them with an alternative to liquidation (Companies Act No 71 of 2008, s128[1][b]). This is intended to enhance the viability of those businesses, as well as the economy as a whole. Prior to business rescue provisions being enacted, judicial management was used for this purpose, but this was traditionally seen as a precursor to liquidation (Levenstein 2008). The business rescue provisions introduced in 2008 brought South African company law in line with international provisions for corporate turnarounds (Levenstein 2008) and aimed to address the shortcomings inherent in judicial management (Loubser 2010). The Minister of Trade and Industry acknowledges that the regime has a number of shortcomings that have come to light in the implementation of business rescue, such as ‘sanctions applied to business [rescue] practitioners and the regulation of their activities’ (The Commission 2014:6)
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