Business Rescue Practitioners Research Articles

Exploring the applicability of effectuation theory in distressed venture environments

Orientation: Once appointed, business rescue practitioners and turnaround professionals are faced with critical decision making of whether a distressed venture contains an opportunity as judged by reasonable prospect.Research purpose: This study investigated and explored the application of ‘effectuation theory’ principles and/or causation elements to the distressed venture opportunity (DVO) decision making.Motivation for the study: Effectuation is applied by experts to an entrepreneurial opportunity, and it was important to investigate whether effectuation and its principles would inform practitioners for better decision making when evaluating a DVO.Research design, approach and method: A qualitative study was conducted with 15 business rescue practitioners (BRPs) from the Gauteng province. The data were collected through in-depth semi-structured interviews and a thematic analysis was used to analyse the data.Main findings: This study reveals that all five effectuation principles and some causation elements are applicable to the DVO judgement. The findings indicate that both effectuation and causation are applied in a complementary manner depending on the context.Practical and/or managerial implications: This study highlights the importance of applying effectuation and causation elements for practitioners to achieve success. By applying both logics, BRPs can build resilience in their strategies, be creative in adapting to solutions as they arise and engage with stakeholders in the business rescue process.Contribution and/or value add: This study extended the application of effectuation theory to distressed venture environments, offering insights into how practitioners can make better decisions when evaluating a DVO.

RESCUING THE BUSINESS RESCUE PROCESS: A CRITICAL REFLECTION ON THE AUTHORITY TO APPOINT A SUBSTITUTE BUSINESS RESCUE PRACTITIONER THROUGH THE LENS OF Shiva Uranium Limited v Mahomed Mahier Tayob 2022 (3) SA 432 (CC)

A determination on the authority to appoint a substitute business rescue practitioner is particularly important for its bearing on the perpetuity of business rescue proceedings. In turn, business rescue proceedings provide a rehabilitative avenue for ensuring that financially distressed companies are extricated from their financial quagmire, thereby achieving company profitability, preservation of employment, economic development and other significant social goals. Through the lenses of Shiva, the case note critically reflects on the contestation regarding who can appoint a substitute business rescue practitioner in terms of the applicable provisions of South Africa’s Companies Act 71 of 2008, wherein the court-appointed business rescue practitioner has either resigned, incapacitated or died. The case note argues that whilst the Constitutional Court in Shiva rightly held that the company or the affected person who lodged the business rescue application has the right to make the alternative appointment, depending on whether the business rescue is voluntary or compulsory, there is a need to go beyond this decision by rethinking who can be appointed as a business practitioner and well as the delegative authority of the courts. Using the classical India approach and international best practices, this case note advances the need to amend the Companies Act provisions governing the appointment of a business rescue practitioner to achieve better perpetuity and obviate the disruptions of companies’ rehabilitative process.

Using practitioners’ voices in developing a business rescue practitioner expert profile

The study explored how business rescue (BR) practices can inform the development of an occupation profile needed to lay a foundation for developing business rescue practitioners’ occupation-specific qualifications. There are 11 professional organisations whose members qualify to serve as business rescue experts. The relevant occupation cannot have more than one occupation expert profile. The study employed qualitative approaches that entailed semi-structured interviews with 20 informants (12 business rescue practitioners, four short skills development programme (SSDP) managers, and 4 SSDP facilitators) and qualitative document content analysis of 30 court cases settled on the BR. The 12 business rescue practitioners (BRP) were randomly selected. However, other informants were accessed through a purposeful sample selection process. The field findings show that the BRP occupation in South Africa is a regulated practice area without an occupation expert profile. The BR practices have not been incorporated in a qualification framework registered on the Qualification Framework (NQF) governed by the South African Qualifications Authority (SAQA). Development of pipeline talent is limited, and the monitoring of SSDPs encounters limitations without an occupation expert profile and an occupation-specific qualification. The BR practices can be categorised into 11 tasks linked to practitioner training disciplines. The existing SSDPs provide an important mechanism for continuing professional development. However, the contents should be linked to BR practices and an occupation profile embracing the BRP role as an interim managing director in a business rescue process. The uniqueness of this article resides in its documentation of BR practices generated from multiple data sources that should be used to develop an occupation expert profile that reflects BRP’s capability. The setting of the BR process requires experts to operate in the capability realm. Methods: The study employed qualitative approaches that entailed semi-structured interviews with 20 informants (12 business rescue practitioners, four short skills development programme (SSDP) managers, and 4 SSDP facilitators) and qualitative document content analysis of 30 court cases settled on the BR. The 12 business rescue practitioners (BRP) were randomly selected. However, other informants were accessed through a purposeful sample selection process. Results: The field findings show that the BRP occupation in South Africa is a regulated practice area without an occupation expert profile. The BR practices have not been incorporated in a qualification framework registered on the Qualification Framework (NQF) governed by the South African Qualifications Authority(SAQA). Development of pipeline talent is limited, and the monitoring of SSDPs encounters limitations without an occupation expert profile and an occupation-specific qualification. The BR practices can be categorised into 11 tasks linked to practitioner training disciplines. Practical implications: The existing SSDPs provide an important mechanism for continuing professional development. However, the contents should be linked to BR practices and an occupation profile embracing the BRP role as an interim managing director in a business rescue process. Originality value: The uniqueness of this article resides in its documentation of BR practices generated from multiple data sources that should be used to develop an occupation expert profile that reflects BRP’s capability. The setting of BR process requires experts to operate in the capability realm.Keywords: business, expert, occupation, practitioner, practice, profile, rescue, voices.

Ethical Standards and Responsibilities of Business Rescue Practitioners: A Literary Analysis of the Danco Case – 2023

Ethical Standards and Responsibilities of Business Rescue Practitioners: A Literary Analysis of the Danco Case – 2023

Caveat petitor. Must a business rescue practitioner pay costs of liquidation de bonis propriis?

’n Sakereddingspraktisyn is verplig om aansoek by die hof te doen om die likwidasie van die maatskappy indien dit blyk dat daar nie meer ’n redelike vooruitsig is om die maatskappy te red nie. Wanneer sakeredding daardie stadium bereik, is die kanse goed dat die sakereddingspraktisyn ’n skuldeiser van die maatskappy is vir onbetaalde fooie en uitgawes. ’n Skuldeiser wat aansoek by die hof doen om die likwidasie van ’n maatskappy, moet ’n bydrae maak om die likwidasiekoste te delg indien die verkoop van die bates van die maatskappy nie voldoende vrye oorskot oplewer om dit te betaal nie. Daar is ook ’n goeie kans dat die verkoop van die bates van die maatskappy nie voldoende vrye oorskot sal oplewer om die likwidasiekoste te delg nie. Met hierdie bydrae oorweeg die outeurs of dit beteken dat die sakereddingspraktisyn wat ook ’n skuldeiser van die maatskappy in sakeredding is ’n bydrae (effektief de bonis propriis) moet maak om die likwidasiekoste te delg. Dié regsvraag word beheers deur die Insolvensiewet van 1936, die Maatskappywet van 1973 en die Maatskappywet van 2008. Die tersake statutêre bepalings is nie met mekaar belyn ten einde die regsvraag sonder teenspraak te beantwoord nie. Die korrekte vertolking van die wetgewing word oorweeg aan die hand van wat hedendaags die geykte benadering van die Suid-Afrikaanse reg is dat vertolking dieselfde gewig moet verleen aan die teks, konteks, en oogmerk van die wetgewing wat gelyktydig oorweeg moet word, samelopend met die grondwetlike oorwegings. Die outeurs doen na oorweging van hierdie faktore aan die hand dat die sakereddingspraktisyn nie ’n bydrae moet maak om ’n tekort aan te vul om likwidasiekoste te delg indien die aansoek qua sakereddingspraktisyn gebring word om likwidasie van die maatskappy nie. Die sakereddingspraktisyn voldoen met so ’n aansoek aan ’n statutêre verpligting en bring dit nie om ’n verpligting van die maatskappy jeens die sakereddingspraktisyn as skuldeiser af te dwing nie. ’n Teenstrydige vertolking sal ’n bykomstige hindernis plaas in die evaluering van die potensiële keuses om sakeredding na te streef. Dit sal, teenstrydig met die openbare belang, sakereddingspraktisyns afskrik om aanstellings te aanvaar en hulle aanmoedig om voort te ploeter met sakeredding nieteenstaande die feit dat objektief dit geen vooruitsig op sukses het nie.

Practices applied by practitioners to achieve management and financial control during business rescue

Orientation: To resuscitate financially distressed companies in South Africa, business rescue as introduced through the enactment of Chapter 6 of the Companies Act 71 of 2008 requires the business rescue practitioners (BRPs) to take management and financial control as part of their specific powers and duties.Research purpose: This study investigated what practices BRPs apply in order to achieve management and financial control.Motivation of the study: Business rescue practitioners are faced with complex assignments with no clear measurements in practice, thus making judgements subject to the perception of the enquirer. It was important to better understand the practices applied by BRPs to achieve management and financial control.Research design, approach and method: A qualitative study was conducted and 13 BRPs within the Gauteng Province were approached. These BRPs were registered with the Companies and Intellectual Property Commission and consisted of junior, senior and experience BRPs. A thematic analysis was conducted to analyse the interview data. This study was approved by the Research Ethics Committee of the Faculty of Economics and Management Sciences at the University of Pretoria.Main findings: The findings indicate that management control is pursued via four main categories of tasks: meeting with stakeholders; clarification of roles; taking control of decision-making and understanding the business model. Taking financial control consists of managing finances, examining key financial information and engaging with financial people.Practical/managerial implications: For practitioners and educators, this study highlights the importance of using these practices to take control and remain in control in conjunction with management to achieve a productive rescue outcome.Contribution/value-add: This study minimises the gap that exists in the literature, detailing the specific activities conducted to achieve management and financial control and how to remain in control.

A qualitative exploration of the bidding processes used in business rescue

Orientation: In business rescue, when pursuing the sale of the business to a third party, the business rescue practitioner (BRP) may use different bidding processes to interact with and select buyers.Research purpose: This study aimed to provide a framework to classify and describe the various bidding processes, including identifying the factors that would preserve value to the benefit of creditors and shareholders.Motivation for the study: Chapter 6 of the Companies Act is silent on the requirements regarding bidding processes. Therefore, the industry and legislator may benefit from guidance from industry experts.Research approach/design and method: Qualitative exploratory, using semi-structured interviews with 11 South African senior business rescue practitioners.Main findings: Three types of bidding processes were identified. In a sophisticated bidding process, information is communicated to buyers using a virtual data room. The second bidding process is less sophisticated; printed document packs are provided to bidders, and bids are submitted in tender boxes. Thirdly, the private bid-out process, where preferred bidders compete against each other in a closed envelope boardroom auction. The findings also revealed that deal certainty is more important in business rescue than ordinary mergers and acquisitions. Moreover, an equitable value, rather than a general market value, is often applied because of the bidding process. Lastly, the study identified a need for the pre-involvement of the BRP before a company files for business rescue, an aspect not currently allowed by the Companies Act.Practical/managerial implications: BRPs can benefit from the explication of the types and detailed steps of bidding processes. Moreover, the findings fill the void of limited guidance in the Companies Act.Contribution/value-add: The classification and description of the various bidding processes and key considerations in the context of a business rescue will assist BRPs in South Africa in preserving value under business rescue and guide the legislator in amending the Companies Act.

Annual Financial Reporting: A Quantitative Analysis of the Temporal Going Concern Status during Business Rescue Proceedings

Purpose: Financial reporting guidance such as the Conceptual Framework for the Presentation of Financial statements (CF), together with specific International Financial Reporting Standards (IFRS) such as International Accounting Standards no. 1 (IAS 1), require an assessment of whether a company can be considered a going concern at the time of preparing its annual financial statements. According to the Companies Act, no. 71 of 2008 (Companies Act), a company in financial distress may file for temporary business rescue protection in order to reorganise its affairs to continue to exist on a solvent basis (return to solvency [RTS]) or, if that is not possible, to offer a better settlement to creditors or shareholders, than under immediate liquidation (better settlement than under immediate liquidation [BSIL]). Building on prior qualitative research in this area, this paper quantitatively investigates the temporal going concern status in the context of a South African company listed on the Johannesburg Stock Exchange (JSE) while under business rescue. Design: The paper follows a quantitative cross-sectional design using a purposive nonprobability sampling method. Empirical data were collected from accounting and business rescue experts using a structured self-administered questionnaire. The data were analysed using descriptive and inferential statistics to detect patterns of association between variables of interest. Findings: The paper presents quantitative empirical evidence supporting prior qualitative research on business rescue context-specific indicators of going concern. In particular, if a South African listed company files for business rescue protection, the company may not be regarded as a going concern, for annual financial reporting purposes, up to the adoption or rejection of a business rescue plan. Furthermore, the evidence shows that when a business rescue plan is adopted that aims to offer a BSIL, the company cannot be considered to be a going concern during the business rescue proceedings. Moreover, should a business rescue practitioner aim for an RTS, the evidence shows that the company can only be likely regarded as a going concern when the business rescue plan is substantially implemented. Value: Management and auditors should note that in the case of a BSIL, the evidence presented implies an underlying assumption other than the going concern assumption. This is also implied in the case of an RTS aim prior to the substantial implementation of the business rescue plan. In the absence of any other defined underlying assumption, the liquidation basis is the de facto alternative. Moreover, the underlying assumption in an RTS will also likewise be the liquidation basis in the absence of another defined underlying assumption. Standard-setters should take note of the need to provide more guidance on the matter.

South African Airways – born again?

Case overview This case focuses on the business rescue of South African Airlines. SAA, four times rated the best airline in Africa (SAA, 2019), was already insolvent when in early 2020 COVID-19 decimated the world. The state-owned airline, which had last made profits in 2011, continued to lose millions of passengers to competitors over the next decade and, despite bailouts of more than R40bn, entered Business Rescue in December 2019, still owing creditors more than R26bn. To the surprise of many, Public Enterprises minister Pravin Gordhan was determined to rescue the airline. In May 2021, the business rescue practitioners handed SAA back to the interim board and Thomas Kgokolo (CA) (MBA) was appointed interim CEO. In June 2021, Gordhan announced a “born again” SAA, “almost ready to take off” and promised no more bailouts. But, with several billion rand outstanding to complete the rescue plan, a grounded fleet, unresolved labour problems, an critical but unnamed “strategic-equity partner” and a largely unvaccinated country entering its third COVID wave – what were the chances? Expected learning outcomes Within the framework of a country desperately in need of jobs and short of capital, the case raises questions about ethics, accountability, responsibility, management, economics and strategy. Should retrenched workers in airlines feel the consequences of their unfortunate career choices? Ought government’s bail-out already failed industries? Should governments run airlines? What sources of funds are available? Have all the necessary requirements for “restructuring” to succeed been satisfied? Supplementary materials Teaching notes are available for educators only. Subject code CSS 11: Strategy. Study level/applicability MBA, Exec-ed.

The business rescue practitioners’ professionalism: are we there yet?

Purpose and context: The purpose of the study was to explore the construction of professionalism in a multiple professional bodies (MPB) landscape in South Africa (SA) and demonstrate how this construction can be used to enhance a professional accreditation regime. Professional accreditation has become a pre-requisite for business rescue practitioners (BRPs). The Companies and Intellectual Property Commission (CIPC) licensing is linked to multiple professional bodies’ knowledge and practices but are not generic. This study was guided by one key question: How do PBs providing BRPs construct professionalism, and to what extent can the existing construction of professionalism facilitate the development of a professional accreditation regime? Research design and methods: A qualitative research design used required researchers to use four consecutive steps, namely (a) interviewing member services’ managers at four professional bodies (PBs); (b) systematic content analysis of codes of professional conduct and policy statements to identify constituent professionalism notions; (c) a systematic search of the literature to identify notions of professionalism mentioned in definitions and explanations of the construct; and (d) analysis of notions of professionalism using the constant comparison procedure to reveal critical themes. Results: A total of 90 separate notions of professionalism were identified in the 192 scholarly papers included in our study. The identified themes within business rescue practitioner (BRP) professionalism (emphasising relational aspects) point to practitioner dealings with (i) clients (business rescue candidates); (ii) government and others; (iii) the PB; and (iv) oneself to gain the essence of occupation. There is fragmentation between the constructed conceptualisations of professionalism among PBs, leading to an incoherent and inconsistent expert accreditation regime. Practical implications and value: The results from the indicated exploration steps were used to advance a programmatic framework to construct professionalism in an MPB landscape and set a future research agenda. The results also show that business rescue practitioners’ professionalism cannot be attained in a multi-professional body setting with an integrated professional accreditation framework.

Methodological Considerations in the Professional Accreditation Research

This essay paper provides methodological considerations for research on turnaround management (business rescue) practitioner (BRP) accreditation. The article responds to recent BRP licensing debates and the need to enhance BRP capabilities through continuing professional development (CPD). We assess existing data collection procedures using the practice theory and demonstrate sequenced integrated data collection procedures (IDCPs) to study BRPs’ professional accreditation frameworks. We illustrate IDCPs using a research design for “how BRPs should be accredited by their professional bodies (PBs) before obtaining a practice license”. The proposed IDCPs call for the purposeful interpretation of legislative instruments governing BRP work and other multiple-party data collection techniques. The paper lays out the problems associated with using questionnaire surveys and semi-structured interviews to document BRP practices and the required professional capabilities. We propose a research design to illustrate the application of the IDCPs in a multiple PB occupation.

The State of Business Rescue Practitioners Professional Accreditation

Business rescue practitioners (BRPs) are subject to many allegations of abuse and, therefore, professional accreditation has become a pre-requisite. The Companies and Intellectual Property Commission (CIPC) licensing is linked to multiple professional bodies’ knowledge and practices but is not generic. This study was guided by one key question: What is BRPs’ accreditation’s current state in a multiple professional body occupation? We used data mapped to scholarly and documented policy sources, categorized results from extensive reading, and integrated critical constructs (after the deconstruction of concepts) to yield a conceptual framework to develop a comprehensive understanding of professional accreditation. The results confirm the existence of a legal framework and institutional arrangements that are not coherently applied because of the absence of a professional accreditation framework (PAF). The proposed conceptual framework captures the concepts of the business rescue domain, professionalism, competency, accreditation, and definition of key terms to provide an interpretive approach to the BRPs’ accreditation reality resulting in a PAF based on the integration of BRP tasks and services and accreditation, competency, and professionalism.

Investigating the direct costs of business rescue

Orientation: The direct costs associated with business rescue proceedings are essential to the decision-making of directors, business rescue practitioners and other affected parties. Business rescue has come under criticism for being a costly procedure, but what constitutes these costs and how they are defined remain largely unknown.Research purpose: The aim of this study was to identify and measure the direct costs of business rescue proceedings in South Africa. This research also explored the relationship between direct costs and the following variables: firm size and duration of business rescue proceedings.Motivation for the study: Despite the significance of understanding reorganisation costs, astonishingly little is know about the size and determinants of the direct costs of business rescue in the South African context. Business rescue practitioners fees and other related expenses have been blamed for worsening business rescue proceedings’ reputation. However, researchers have not yet determined the nature or quantum of such costs.Research design, approach and method: This study employed an exploratory sequential mixed-method research design. The first phase comprised semi-structured interviews supplemented by a closed card sort with 14 business rescue practitioners. The first phase resulted in direct cost categories and components used to develop a survey instrument. The survey was administered in the second phase and measured the direct costs for 19 South African firms previously under business rescue.Main findings: The first phase results show that the direct costs of business rescue consist of four categories: the basic remuneration of the business rescue practitioner, contingency fees, professional fee disbursements and general disbursements. Because of the small sample size, the results of the second phase were inconclusive.Practical/managerial implications: This research contributes to the management body of knowledge by providing business rescue practitioners, the management of distressed companies, and affected parties, especially creditors with a starting point into understanding the direct costs of business rescue proceedings.Contribution/value-add: This is the first study of its kind, to quantitatively measure the direct costs of business rescue in the South African context. Therefore, the results of the study may offer affected parties some insight and clarity regarding the nature of the direct costs of business rescue.

The construction of occupational professionalism among business rescue practitioners supplying professional bodies

Purpose of the research: To identify and explore the construction of professionalism in a multiple professional bodies (MPB) landscape in South Africa (SA) and demonstrate how such construction can be used to enhance professional accreditation regime. Design of research and methodology: The study used a qualitative research design. This required five consecutive steps of (a) interviewing member services managers at four professional bodies (PBs); (b) systematic content analysis of codes of professional conduct (CPCs) and policy statements to identify constituent professionalism notions; (c) a systematic search of the literature to identify notions of professionalism mentioned in definitions and explanations of the construct; and (d) analysis of notions of professionalism using the constant comparison procedure to reveal key themes. The results in (a) through to (d) were used to advance a programmatic framework to construct professionalism in an MPB landscape. Research results: The construction of professionalism is linked to services rendered and competencies in the MPB landscape. The existing licensing regime encapsulates the increased importance of the MPB landscape, leading to a shift away from a conventional conceptualisation of professionalism in a single professional body (PB) setting. A total of 90 separate notions of professionalism were identified in the 192 scholarly papers included in our study. The identified theme within BRP professionalism (emphasising relational aspects) point to practitioner dealings with (i) clients (business rescue candidates); (ii) government and others; (iii) the PB; and (iv) oneself to gain the essence of occupation. There is fragmentation between the constructed conceptualisations of professionalism among PBs, leading to an incoherent and inconsistent expert accreditation regime. Practical implications and value: The findings of the study are useful in the integration of practitioner learning and development practices in the PBs whose members serve as BRPs. BRP is a regulated occupation and requires a distinct professional accreditation framework (PAF) to integrate multidimensional professionalism in the MPB landscape. Approaches to enhance accreditation should consider delineating BRP services and task from interview results from a community of practitioners. The PAF will structure the construction, investigation, and documentation of occupational professionalism required by the licensing authorities. It will also help delineate BRP as a discipline worth of academic and professional pursuits with known competencies.

Valuation practices under business rescue circumstances in South Africa

Background: A business rescue plan should indicate the benefits of adopting a business rescue plan as opposed to the benefits of immediate liquidation. Performing a valuation is thus a vital aspect of the business rescue process as the estimated values determine the amount to be divided between creditors and, if possible, shareholders. Conventional valuation methods have the underlying assumption that the business is a going concern (based on liquidy and solvency tests). However, a company in business rescue is not necessarily a going concern, nor in liquidation, leaving the company in a grey area in terms of valuation.Aim: This research explored how the business rescue value of a financially distressed company is determined.Setting: The setting for this study was South Africa.Method: Thematic analysis of qualitative data collected through 11 semi-structured interviews with senior business rescue practitioners (BRPs).Results: When the intention is to return the company to solvency, the BRPs prepared a short-term, undiscounted cash flow budget to determine the business rescue value, but without including a terminal value in the projected cash flows. In contrast, when the intention is to obtain a better return compared to immediate liquidation, BRPs follow an asset approach to determine the business rescue value. The results also showed that the business, digital and relational acumen of the BRP is a major influencer in the business rescue value.Conclusion: The financial elements identified and substantiated in this study may serve as best practice guidance in the business rescue industry and lead to an expansion of the existing valuation theory.

Role of stakeholders in business rescue

Purpose: It is widely accepted that stakeholders play a role in the turnaround of an organisation. However, the exact role is unclear. This study set out to investigate the roles of stakeholders in the success of business rescue through the lens of stakeholder theory. Design/methodology/approach: The study research design is qualitative following an exploratory approach. The choice of technique for the study was semi-structured interviews. Findings/results: The findings indicate that key stakeholders go beyond affected parties as described by Chapter 6 of the Companies Act. Creditors are considered the most influential stakeholders due to their ability to vote on the business rescue plan, followed by post-commencement funders and employees, to ensure business continuity. Customers were given the same level of importance by the business rescue practitioners as other affected parties. Due to the dynamic nature of business rescue, business rescue practitioners prioritise resourceful stakeholders when managing the process. A simplified framework illustrating roles of stakeholders during business rescue is presented. Practical implications: Stakeholder management should be recognised as a valuable exercise that must be allocated time and resources. Business rescue practitioners should recognise stakeholder influences at different stages of the business rescue process.

Ascertaining the Impact of Post-Commencement Finance on Business Rescue in Kwazulu-Natal, South Africa

Corporate rescue in South Africa has been bedevilled by many challenges. The new South African Companies Act 71 of 2008 (hereafter referred to as “the Act”), which came into effect in May 2011 contains a new chapter titled “Business rescue and Compromise with Creditors”. Post commencement finance (PCF) is finance or credit approved for a company in business rescue, which is regulated by section 135 of the South African Companies Act. The Act provides for companies to secure PCF as turnaround investment to secure its financial well-being. However, it is difficult for a distressed business to access PCF as it is challenging to operate on a cash basis when they face the likelihood of insolvency or forced sale of their assets to remain sustainable. This was evident during the recent global financial crises when obstacles to accessing PCF were identified as the chief deterrent for businesses that require rescue or reorganization (Pretorius and Du Preez, 2013). A review was performed to assess what the impact was, of a distress company obtaining PCF in KZN. Empirical research includes a qualitative research design engaged to explore the impact of PCF on the success of business rescue efforts for distressed companies in KZN. Insights and understandings were drawn from the participation of business rescue practitioners in Kwa Zulu Natal. This included addressing the challenges of obtaining PCF and what finance is available. The findings from the literature review confirm that the barriers to obtaining PCF are the most limiting factors in rescuing businesses in distress in KZN and the challenges include the time frame within the business rescue plan and that financial institutions are not prepared to support a business rescue without collateral.

Exploring the indirect costs of a firm in business rescue

It may be argued that the indirect costs of financial distress are substantially higher than the direct costs. Consequently, indirect costs of participating in a formal turnaround may hinder the success of a reorganisation attempt. This study set out to explore the indirect costs financially distressed firms face as a consequence of participating in business rescue in South Africa. Due to the implicit nature of these costs, the focus was placed on investigating and identifying the sources of the indirect costs associated with business rescue. This study employed a qualitative research design, whereby semi-structured interviews were conducted with 13 business rescue practitioners. The study confirmed that firms may experience six difficulties during business rescue. However, there are several factors that influence the severity of these difficulties. Conversely, it appears that indirect costs may also offer firms several benefits. The results of the study may assist affected parties, as they offer some insight and clarity on the indirect costs of business rescue. Understanding indirect costs may assist stakeholders involved in the process to find strategies that will help to preserve the value of the firm and reduce the negative impact for all stakeholders involved.

Small, medium and micro-enterprises’ distress and factual evaluation of rescue feasibility

Background: Entrepreneurs often face distress in their businesses; as one way to address it, they can file for business rescue. The Companies Act 71 of 2008 requires the appointed business rescue practitioner (BRP) to place before the court facts proving ‘reasonable prospect’. This often seems determined mainly by the subjective opinion of practitioners, who rely on their experience and knowledge in rescue and business management. This appears to be in direct contrast to the requirements for factual evidence set out by several court judgements. There are many questions surrounding the determination of reasonable prospect, as there seems to be no benchmark for entrepreneurs and BRPs to work towards or a prescribed process to be followed.Aim: This article investigates different methods of factually determining reasonable prospect and guiding the decision-making process during the pre-filing and initial stages of the rescue of small, medium and micro-enterprises (SMMEs).Setting: The study was conducted using South African case law and financial models relevant to SMMEs in South Africa.Methods: Qualitative analysis of existing financial models and case law to better understand how BRPs determine initial reasonable prospect when working with SMMEs.Results: The research report methods of determining financial distress and decline within the relevant case law.Conclusion: Reasonable prospect relies heavily on experience and opinion. Factually proving reasonable prospect remains problematic because of information asymmetry and the lack of data integrity. Affected parties (including entrepreneurs) could benefit from the insights obtained in this study. Identifying methods that could assist with the factual determination of reasonable prospect could contribute to entrepreneurial education, as well as address the current conflict that surrounds the subject.

Business rescue: Adapt or die

Background: The low success rate of business rescue has prompted debate relating to the effectiveness and continued suitability of business rescue as a mechanism to rehabilitate financially distressed companies. Although this legislation was implemented in May 2011, statistics indicate that the success rate for business rescues is only approximately 12%. A feature of the business rescue environment in South Africa is the lack of knowledge, necessitating more research in the field.Aim: This study focused on changes required to ensure the survival and increased success of the business rescue legislation.Setting: This research was undertaken in South Africa between 2015 and 2017.Methods: A mixed-methods research approach was utilised for the study. The approach entailed interviews with 7 of the top 10 business rescue practitioners to diagnose reasons for business rescue failure and establish factors that would contribute to successful business rescues. A survey was conducted with the membership of the Turnaround Management Association of Southern Africa.Results: The survey was mailed to 130 members and the response rate was 54%. This study found that the causes of business rescue failures are mainly attributable to the skills deficit of the business rescue practitioner or the practitioner’s abuse of legislation. There is also a negative impact of appointing a liquidator as a business rescue practitioner. Other factors contributing to the failure of business rescues are management’s delay in filing for business rescue, either due to the resistance of filing or their lack of awareness of their distressed status. This study also provided the ranking order for business rescue success factors with the accreditation of a business rescue practitioner being ranked as first.Conclusion: The study chiefly focused on diagnosing and understanding the reasons for business rescue failure. The original contribution of this study to knowledge is the ranking of an accreditation framework for practitioners as the most important factor that would contribute to a successful business rescue. This study not only explains the low success rate of business rescue but ways to improve and succeed in rescuing ailing businesses.