THE ROLE OF A PRE-ASSESSMENT WILL ENHANCE AND IMPROVE THE LIKELIHOOD OF SUCCESS.
In terms of Chapter 6 of the Company’s Act (“Act”) no 71 of 2008, the directors of a company must ascertain whether the business is financially distressed and determine if a Business Rescue has a reasonable prospect of success.
To meet the criteria for “financially distressed”, it must be reasonably unlikely that the business will be able to pay all of its debts within the ensuing six months.
Thereafter the directors must apply to the High Court for permission to go into Business Rescue.
The appointed Business Rescue Practitioner is then subject to a given time frame in which to prepare a Business Rescue plan which usually includes turnaround.
WHY PERFORM A PRE-ASSESSMENT?
To determine whether a Business Rescue is a viable option / reasonable prospect of rehabilitation.
Objective and independent view of the business plan prior to the filing for Business Rescue.
Will reduce the number of companies put into Business Rescue, increasing the likelihood of success.
Will reduce the number of Business Rescues being converted into liquidations.
Will save the company unnecessary costs associated with a failed Business Rescue.
An early evaluation of the company’s affairs should become an integral part of the Business Rescue.
s129(3)(a) “the company must – publish a notice of the resolution, and its effective date, in the prescribed manner to every affected person, including with the notice sworn statement of the facts relevant to the grounds on which the board resolution was founded”
In order to comply with the above, the Board of Directors must determine prior to applying for Business Rescue, whether there is a reasonable prospect of a successful Business Rescue.