Demand for scarce business rescue practitioners is likely to soar
“There are probably not enough of these practitioners to cope with the demand produced by the Covid fallout
14 MAY 2020 – 15:02 by
The economic fallout caused by Covid-19 in SA will mean a dramatic increase in corporate failures, raising the question of whether these businesses can be refinanced — and if there are enough experienced business rescue practitioners in the country to help them survive.
Across the country we have seen struggling businesses run out of funds to settle with their creditors. Often creditors are not willing to accept payment holidays because they themselves are severely distressed. The constant pressure placed on distressed companies to pay overhead costs to keep their businesses going, coupled with salaries, wages and rental obligations, push these companies into a corner. They often have no choice but to seek the protection of the statutory moratorium offered by the business rescue process, as set out in the 2008 Companies Act.
Once business rescue practitioners are appointed they take control and supervise the management of the company’s affairs, engaging with all stakeholders to prepare a business rescue plan. While the plan is being drafted there is a freezing of all historical debt, providing the company with breathing space while it goes through the restructuring process. Critical to the company’s survival, especially where it has already run out of cash, is the need to source financing, known as post-commencement finance. Such finance is critical since it allows the company to keep trading during the business rescue process…”
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