A review of business rescue in South Africa since implementation of the Companies Act (71/2008)

Abstract

This study examined the new Companies Act (71/2008) with a specific focus on Chapter 6, business rescue. This rather controversial legislation was implemented in South African company law on the 1st of May 2011 and redefines how legislation can possibly save financially distressed companies from distress and ultimately liquidation proceedings. The literature review has focused on the purpose of business rescue as set out by the new Companies Act. It has gone into much detail on the set processes, revealed the key stakeholders involved and their respective responsibilities set out by the new Act. The study touched on current international trends in saving distressed businesses. A published financial distress model was discussed and a link made about where best to initiate business rescue actions within this four-stage model. In this study the empirical research adopts content analysis as a research method. An investigation was conducted on all business rescue applications received by the Companies and Intellectual Property Commission (CIPC). Additional analysis of a large creditor’s portfolio of business rescue applications showed some initial success rates of this new legislation. The mini-dissertation concludes with limitations and challenges faced during the study, followed by recommendations about how to excel in business rescue practice in years to come.