Unit 18 - Business rescue and compromise

Question 1

When can the board pass a resolution to commence with business rescue
proceedings ?

Answer 1

• That the company is financially distressed.
• There appears to be a reasonable prospect of saving the company.

Question 2

When is company considered financially distressed ?

Answer 2

• Can’t pay its short term debts.
• Reasonable that they may become insolvent.

Question 3

Discuss an affected person.

Answer 3

Affected person can apply to court to set aside resolution where:

• No reasonable basis for believing the company is financially distressed.
• No reasonable prospect of rescuing the company.
• Procedural requirements in terms of section 129 not complied with .

Question 4

When does business rescue commence ?

Answer 4

• Company files the resolution.
• Applies to court for consent to file resolution.
• Affected person applies to court.

Question 5

What is the difference between a junior, experienced, and senior practitioner ?

Answer 5

• Junior Practitioner small companies (alone) and is an assistant to the rest
• Experienced (5 years) small or medium companies and assistant to large.
• Senior (10 years) small, medium, large as a sole practitioner.

Question 6

What are the key tasks of the practitioner ?

Answer 6

The practitioner is responsible for investigating the company’s:

• Affairs.
• Business.
• Property.
• Financial situation.

Question 7

What if there is not a reasonable prospect of rescue ?

Answer 7

• The practitioner must inform the court, company, and affected persons.
• Apply to court to discontinue the rescue and place the company into liquidation.

Question 8

What are the meeting requirements ?

Answer 8

Within 10 business days of the practitioner’s appointment, meetings of creditors and employees must be convened.

Question 9

What are the rights of the affected persons ?

Answer 9

• Creditors have the right to notice of proceedings, participate in meetings, and vote on the business rescue plan, and propose alternative business plans.
• Employees right to notice, participation in proceedings, and the ability to form a committee.
• Securities Holders have the right to vote on the business rescue plan if it affects their securities.

Question 10

What are the effects of business rescue plan.

Answer 10

• No legal actions can proceed.
• roperty dealings are restricted to the ordinary course of business.
• The company must obtain consent from secured creditors if it disposes of property.
• The practitioner can suspend or cancel certain contracts.

Question 11

When does business rescue end ?

Answer 11

• The court sets aside the rescue resolution.
• It converts to liquidation.
• A notice of termination is filed with the CIPC.
• The business rescue plan is proposed and rejected, or it is successfully implemented.