Chapter 6 of the Companies Act 2008 (Act 71 of 2008) provides for the efficient rescue and recovery of financially distressed companies, in a manner that balances the rights and interests of all relevant stakeholders.
All businesses that are financially distressed and want to take a decision to start rescue proceedings can file a notice to start business rescue proceedings with the CIPC.
Business rescue can be initiated by:
- The board of directors;
- By an application to court when the business is financially distressed;
- Various affected persons by application to court (including shareholders, creditors, registered trade unions and employees).
The decision by a board to pass a resolution for business rescue needs to be done urgently to enable the business rescue practitioner to take control for the purposes of having a business rescue plan approved and thereafter implemented.
A business rescue practitioner will be appointed to oversee and supervise on a temporary basis the management, affairs and business of the company and to devise, prepare, develop and implement a business rescue plan. The plan will be implemented if approved by creditors and shareholders to the extent that the rights of the shareholders will be affected.
A director or a member would have a duty to pass consider passing a resolution for a company’s business rescue or alternatively resolve to wind up or liquidate as soon as he or she becomes knowingly aware that the company is either:
- financially distressed or
- is unable to pay its debts
During the company’s business rescue proceedings, each director of the company:
- would continue to exercise the functions of a director subject to the authority of the practitioner duly appointed
- must assist the practitioner that is expected to operate the company and to continue to run its business
- may delegate any power or function to the practitioner duly appointed that would have full management control of the company in substitution for its board and pre-existing management.
Important: No liquidation proceedings must have commenced against the company when a decision is taken to start business rescue proceedings.
To file for business rescue, follow these steps:
Register as a Customer
To view information on how to register as a customer, click here. If you are already registered as a customer, and know your customer code and password, proceed to step 2.
File for business rescue
Print and complete form CoR 123.1
Scan and e-mail the completed and signed documents together with supporting information to email@example.com
Documents to be submitted:
- COR123.1 Form (duly completed including and signed by a active director/member as per the CIPC register));
- Customer Code (clearly indicated on the form);
- Certified ID copy of the owner of the customer code;
- Certified ID copy of director / member undertaking the sworn statement;
- Sworn statement which contains inter alia the following information:
- Full name, surname and ID number of person undertaking the sworn statement;
- Reasons for resolution to start business rescue proceedings;
- Physical address where most of the business activities in the current financial year were undertaken; and
- All legal proceedings the company or close corporation is involved in (especially proceedings against the company or close corporation), the nature of such legal proceedings and the status thereof (if the company or close corporation is not involved in any legal proceedings such must be indicated as well);
- Letter from the business on its letter head stating:
- PI Score break down and total (as indicated in Companies Regulation26(2));
- Primary business activities (Industry) undertaken in the current financial year; and
- Nomination of Business Rescue Practitioner (BRP) with declaration of his / her independence;
- Resolution by the company or close corporation to start business rescue; and
- Letter from the nominated BRP declaring his / her:
- Capacity to accept the new nomination;
- Independence from the business; and
- Not disqualified as prescribed in the Act.
Service turnaround time: 2 working days of receipt of notice to start business rescue proceedings.
File and Publish Notice of Appointment of Practitioner
Within five days after filing a resolution, the company must appoint a business rescue practitioner, conditionally licensed for the project.
Once the nominated practitioner received a registration certificate, then the company applying for business rescue must print and complete form CoR 123.2.
- The CoR123.2 must be accompanied by a consent letter of the practitioner accepting the appointment.
Scan and e-mail the completed and signed documents to CoR123.firstname.lastname@example.org
- The company must also inform all affected parties of the appointment.
File a status report with CIPC
The Practitioner must file a status report (CoR125.1) with CIPC after three months by e-mailing it to email@example.com. If business rescue proceedings are not concluded within 3 months, or within the time extension granted by court, the business rescue practitioner must file monthly report updates with the CIPC or to the court, in the case of a court-ordered business rescue process, until the proceedings are concluded.