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Business Rescue Explained

Business rescue, as defined by the Companies Act 2008, aims to facilitate the rehabilitation of a company that is financially distressed by providing for the temporary supervision of the company and management of its affairs, business and property by a business rescue practitioner, a temporary moratorium (“stay”) on the rights of claimants against the company or in respect of property in its possession and the development and implementation (if approved) of a business rescue plan to rescue the company by restructuring its business, property, debt, affairs, other liabilities and equity.

How is a company placed in Business Rescue?

There are two ways in which a company can be placed in business rescue: when the board of directors resolves that the company voluntarily commences business rescue proceedings or when an affected person makes a formal application to the High Court for an order placing the company under supervision and commencing business rescue proceedings

When is it time?

When it appears to be reasonably unlikely that the company will be able to pay all of its debts as they become due and payable within the immediately ensuing six months (commercial insolvency); or it appears to be reasonably likely that the company will become insolvent within the immediately ensuing six months (factual insolvency).

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 or shareholders of the company than would ordinarily result from the liquidation of the company.

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