Liquidation or winding up, compromise with creditors and business rescue are mechanisms available to financially ailing companies in South Africa. However, the business rescue process is a relatively new mechanism in South African law.
The Companies Act 71 of 2008 (the "Act") introduced a new "business rescue" process based on Chapter 11 of the US Bankruptcy Code, Bankruptcy Reform Act 1978, aimed at facilitating the corporate rescue and rehabilitation of companies that are financially distressed. Previously, the Companies Act 61 of 1973 provided for judicial management, a regime which proved unpopular and was infrequently used.
Business rescue broadly involves the temporary supervision of the company and of the management of its affairs, business and property, and a temporary moratorium on the rights of claimants against the company or against property in the company's possession while a plan to rescue the company is approved and implemented.
“Liquidation or winding up, compromise with creditors and business rescue are mechanisms available to financially ailing companies in South Africa.”
For a comprehensive document outlining the implications of this area of law in South Africa
click here.
