As companies entering business rescue are financially stressed, time is of the essence and any rescue plan needs to be compiled and implemented as soon as is practically possible.
The process is accordingly well-defined and requires strict adherence to a number of deadlines with serious consequences should they not be met.
While it is possible to apply to the CIPC or if relevant the court, for an extension for number of deadlines, this article attempts to provide a general timetable of events that need to occur. The timetable below is applicable to the voluntary process of applying for business rescue as opposed to a court order.
Business Rescue Timetable
The board of directors must file the prescribed form and a copy of the resolution with the CIPC.
Within 5 days of the board of directors having adopted and filed a resolution to commence business rescue proceedings they must
- Publish a notice of the resolution to every affected person together with a sworn statement of the facts relevant to the grounds on which the board resolution was founded; and
- Appoint a business rescue practitioner who has consented in writing to accept the position.
2. Business rescue practitioner appointment
The board of directors must
- File a notice of the appointment a practitioner within 2 days of the appointment and
- Publish a notice of the business rescue practitioner’s appointment to all affected parties within 5 days of it being filed.
A failure to comply with 1 and 2 will void the business rescue proceedings.
If the business rescue proceedings have not been concluded after 3 months the business rescue practitioner needs to prepare a report on the proceedings. They will then need to update it at the end of each subsequent month until the end of proceedings and deliver it to each affected person and the CIPC.
4. Directors cooperation
With 5 days of the commencement of business rescue proceedings, or such longer period that the practitioner allows, the directors of a company must provide the practitioner with a statement of affairs which contains as a minimum certain information as specified in the Companies Act
5. Practitioner’s remuneration
Any creditor or shareholder who voted against the proposed remuneration for the practitioner may apply to the court within 10 business days for an order setting aside the agreement
6. First meeting of creditors
Within 10 days of being appointed the business rescue practitioner must convene and preside over a first meeting with creditors
The practitioner must determine who are secured, unsecured or concurrent creditors. The practitioner may have the value of a concurrent creditor’s claim independently appraised. In this instance the practitioner must give the concurrent creditor notice of that appraisal at least 15 days before the meeting to determine the future of company (as per 9 below).
Within 5 days of receiving the appraisal the creditor can apply to the court to review the appraisal.
7. First meeting of employees
Within 10 days of being appointed the business rescue practitioner must convene and preside over a first meeting with employees
8. Publication of business plan
The business rescue plan must be published within 25 days after the date on which the practitioner was appointed.
9. Meeting to determine the future of company
Within 10 days of publication of the plan, the practitioner must convene and preside over a meeting of creditors and any other holders of a voting interest to consider the proposed business rescue plan
- At least 5 business days before the meeting the practitioner must deliver a notice of the meeting to all affected persons
- If a vote is taken regarding the business rescue plan and an affected party or the practitioners intends to apply to court to have the vote set aside the practitioner must adjourn the meeting for 5 days to allow the court to deal with the matter
- If, on the request of the practitioner or called upon by an affected person to prepare and publish a revised business rescue plan in terms of the provisions of the Act, the practitioner must do so within 10 business days.
- If an affected person makes an offer to acquire the rights and claims of another affected person as provided for, the practitioner must adjourn the meeting for no more than 5 days to make the necessary revisions to the business rescue plan.
The business rescue process terminates when either
- The court
- Sets aside the resolution on which the business rescue proceedings were initiated
- Has converted the proceedings to liquidation proceedings
- The practitioner has filed a notice of the termination of business rescue proceedings or
- The business rescue plan has been
- Rejected and no person acted to extend the proceedings
- Adopted and the practitioner has subsequently filed a notice of substantial implementation of that plan.
While the Companies Act provides for a defined time frame the financial reality of the company will often dictate that timing of the process. Successful business rescue proceedings often take substantially longer that provided for in the Companies Act.
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