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 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 trading in insolvent circumstances (both factually in that its liabilities exceed its assets, and commercially in that it cannot pay its debts to creditors as and when they fall due
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 CoR126.email@example.com
The following supporting documents must be included in your e-mail:
Documents to be submitted:
- COR126.1 Form (duly completed dated and signed).
- Proof of filing fee of R500;
- Customer Code (clearly indicated on the top right hand corner of the form).
- Certified ID or passport copy of the applicant.
- Certified copies of suitable educational qualifications, in either Legal, Accounting or Business Management.
- Letter of good standing from Accredited Professional Body.
- A comprehensive résumé (CV) containing full and detailed particulars of the applicant’s history and relevant practical experience working in a distressed business environment and demonstrating relevant turn around experience.
- Supporting documentation to substantiate the factual information in respect of the history and relevant practical experience, (provide references).
- Certified copy of a valid TAX clearance certificate (individual).
- A Sworn statement in terms of Section 138 stating that the applicant:
- Is not subject to an order of probation in terms of section 162 (7);
- Would not be disqualified from acting as a director of the company in terms of section 69 (8);
- Is of sound financial status and not insolvent in terms of section 138; and
- That the applicant was never refused membership before or his/her membership was either suspended or revoked by the professional body, (if so provide reasons)
- The applicant must adhere to the concurrent application of Section 5(6) of the Companies Act 71 of 2008 as amended, in case of a listed entity.
- Personal contact details containing e-mail address and cell phone number.
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 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.
File Notice of Substantial Implementation of business rescue plan or business rescue termination
E-mail the completed form to firstname.lastname@example.org.