The Suitability of South Africa's Business Rescue Procedure in the Reorganization of Small-to-Medium-Sized Enterprises: Lessons from Chapter 11 of the United States Bankruptcy Code.

Abstract

South African small- to medium-sized enterprises (“SMEs”) are the bread and butter of our economy. Providing much-needed employment and developing the skills of historically disadvantaged persons formally and informally are some of the most significant benefits of SMEs in a developing country such as South Africa. However, despite these significant contributions to the socioeconomic development of the country, SMEs generally have the lowest survival rates in the world as compared to large enterprises globally, resulting in high rates of business failure and the loss of jobs which these entities create. The Companies Act of 2008 replaces the previous judicial management corporate reorganization procedure for companies in South Africa with the new business rescue model and a compromise between a company and its creditors. Business rescue provides companies in financial distress with the opportunity to reorganize, strategize, and devise reorganization measures that are useful, efficient, and capable of yielding a better return for creditors than liquidation. This Comment comparatively analyzes whether the South African corporate rescue systems, past and present, have developed in line with the needs and interests of South African SMEs in a manner that is efficient and sensitive to the inherent weakness of our economy and the distinctive needs of SMEs in a developing country such as South Africa.