Business rescue came into effect in South Africa in 2011 under chapter 6 of the new Companies Act and is a global trendsetter. The success of business rescue has seen many countries revise their own legislation to more closely mimic and adopt the system. Business rescue assists financially distressed companies by placing a moratorium on legal proceedings against the company, granting the company critical breathing space against claims from its creditors and affording the company the opportunity, if possible, to restructure and continue trading. The ultimate goal of business rescue is to save the company for the benefit of all of its stakeholders whether that means saving the jobs of the employees of the company or allowing the company to continue trading with its customers and creditors. If the company is unable to continue to trade, business rescue may be utilised to structure the sale of the assets of the company to provide a greater return to the company’s creditors than they would have received if the company was liquidated.
Covid-19 and the resultant lockdown have wrought unprecedented economic devastation with businesses and companies large and small scrambling for a lifeline. In this environment, South Africa has seen an ever increasing number of companies turning to business rescue to avoid liquidation. This surge in business rescues has left many creditors fearful of huge potential losses as a number of highly publicised business rescues have resulted in extremely low returns for creditors (some as low as 0 cents in the Rand) and these losses can often have a domino effect of distressing creditors own businesses. There are however also occasions where business rescue results in a positive way forward. A recent example of this is where business rescue practitioners and legal specialists obtained a significant return for creditors in the highly publicised rescue of JSE listed Phumelela Gaming & Leisure.
Phumelela Gaming & Leisure ran into financial difficulties which saw it being placed under Business Rescue in May this year. On 1 September 2020, Phumelela’s Business Rescue Plan was approved by a staggering 99% of its creditors. The Plan will see creditors receive a guaranteed 72c in the Rand underwritten by Mary Oppenheimer Daughters (MoD) with the more likely outcome being a return of 100c in the Rand and potentially even a return for shareholders. This phenomenal result was achieved by Business Rescue Practitioner John Evans of RS Advisors and Fluxmans attorney Colin Strime and means that South Africa’s horseracing industry is no longer in jeopardy.
These exceptional results are a testament to the benefits of an excellent business rescue plan as provided by RS Advisors and Fluxmans attorneys who are leading specialists in this field.
