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Entrepreneurship
How a Business Rescue Practitioner Can Help Your Business
By
2022-12-15
If your business is experiencing financial distress, there is an option to turn things around with the help of a business rescue practitioner. Instead of liquidating the company, it can go through a business rescue process. This process is designed to recover a failing company and return it to a state of trading.
If your company has low prospects for growth and profits, or if your growth and profits are declining, working with a business rescue practitioner can be a great idea.
This quick guide will cover everything you need to know about how a business rescue practitioner works and how they can help your business.
What is a Business Rescue Practitioner?
A business rescue practitioner is an individual who has been appointed to oversee a company that undergoes a business rescue process. This process happens when a company is in financial distress and needs to be restructured. The business rescue practitioner works to help the company maintain a state of solvency to trade again. A business rescue practitioner gets involved with failing companies to help turn them around.
It’s possible to appoint multiple business rescue practitioners to oversee a company. These practitioners need to meet specific requirements set out in the Companies Act of 2008.
When a business rescue practitioner is appointed, they need to immediately determine how likely it will be to rescue the failing company. They achieve this by deeply investigating the company’s finances, assets, and affairs.
How Business Rescue Can Help Your Business
If your business is financially distressed, then going through the business rescue process can help you turn things around and get your business back to a healthy operational state. Doing this is often a better solution than liquidation, as it offers a better return to any creditors or other affected stakeholders. When a business goes through the rescue process, any claims rights of creditors against the company become temporarily stayed.
No legal proceedings can be brought against a company while it’s under business rescue. Business rescue practitioners can also help to obtain post-commencement finance to help the business continue on its growth path.
A business rescue practitioner does not become a permanent feature of your company. Instead, they temporarily sit in to overlook the company’s management, operations, assets, and debts. They create a plan to restructure the company to improve its current state. This can be incredibly helpful for distressed business owners who cannot find the right way forward.
Business rescue offers a solution for saving failing companies instead of simply liquidating them.
How Does a Business Rescue Practitioner Work?
Once a business rescue practitioner is appointed, they gain complete control over the distressed company. They can delegate certain functions of the company to directors of the board, they can remove members of the management team, and appoint new people to the distressed company.
A business rescue practitioner reports to relevant authorities and affected parties of the company. When investigating the distressed company’s affairs, they need to report any of the following cases:
- If it’s unlikely that the business will be able to return to a state of solvency after the rescue efforts
- Any evidence of fraud performed by the company or its directors
- If any company funds were misappropriated
- If there is any evidence that certain directors failed to meet their obligations to the company
- If the company or any of its directors were involved in reckless trading
- If the company is not actually in financial distress
Any parties affected by the company can apply to the court to appoint a business rescue practitioner. The company’s board can also file a business rescue resolution with the CIPC, and appoint the business rescue practitioner (or practitioners).
Placing a company under business rescue is not an easy process through, so it needs to be a careful decision by the directors. When considering the option of business rescue, it's essential that you can prove the company is experiencing financial distress. If there is no clear evidence of this, then bringing on a business rescue practitioner may not be the best solution.
Business rescue can be an excellent solution for financially distressed companies. An appointed business rescue practitioner can provide the time and guidance a company needs to restructure itself and get back on track. Instead of liquidation, business rescue can provide a sustainable second chance for companies that would otherwise fail.