26 May

In the current tough economic trading conditions, there are many businesses that are under severe financial pressure.

The South African economy has not been doing well for a while with ratings downgrades, unstable/unreliable power supply and corruption already killing business and investor confidence prior to the coronavirus pandemic.  

Many South African workers are now faced with or are aware of someone whose employer might be going through or is considering either going for business rescue or liquidation. To many workers these words do not mean much and they cannot differentiate between them or how they will be impacted should it happen.

UASA has put today’s blog as a two part series, this blog will deal with explaining what Business Rescue and Liquidation is, then our next blog on Wednesday will be addressing what are the workers’ rights and responsibilities in terms of these processes.

Business Rescue

What is business rescue?

Business rescue is a process aimed at facilitating the rehabilitation of a company that is financially distressed by providing for the temporary supervision of the company and the management of its affairs, business and property, by a Business Rescue Practitioner.

What is a business rescue practitioner?

A business rescue practitioner is a person appointed to oversee a company during business rescue.

What is the aim of business rescue?

The aim of business rescue is to restructure the affairs of a company in such a way that either maximises the likelihood of the company continuing in existence on a solvent basis or results in a better return for the creditors of the company. 

What is the role of the business rescue practitioner?

The business rescue practitioner is required to investigate the company’s affairs, business, property and financial situation, and thereafter consider whether there is any reasonable prospect of rescuing the company.

How is a company placed in business rescue?

There are two main ways in which a company can be placed in business rescue:

  • ·When the board of directors of a company resolves that the company voluntarily commence business rescue proceedings and be placed under the supervision of a business rescue practitioner
  • ·When an affected person makes a formal application to court for an order placing the company under supervision and commencing business rescue proceedings provided the company has not already been placed under business rescue.

Liquidation

What is a liquidation?

The liquidation process can be defined as the process in which a company voluntarily proceeds to declare itself as being insolvent (unable to pay its debts), or where a creditor of the company brings an application to court in order to have the company declared insolvent.

The result thereof is that the company may no longer proceed to operate its business.

What is the aim of liquidation?

The purpose of liquidation proceedings is to shut the company down and have a liquidator appointed to dispose of the assets of the company and pay whatever proceeds might become available to the creditors of the company by means of a legal order of preference.

Though liquidation might seem easier, it is important to note that both Business Rescue and Liquidation are legal processes and as such the proper legal channels and proceedings must be followed to ensure successful completion.


In our next blog, we will be addressing the employees/workers’ rights and responsibilities in terms of these processes and how UASA, an organisation with over 125 years’ experience servicing members is best positioned to assist our members should these matters arise in the workplace.

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