Ethical standards and responsibilities of Business Rescue Practitioners

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This study analyses the Danco case (2023) and its implications for terminating business rescue proceedings in South Africa. It examines the case’s impact on ethical standards and responsibilities, focusing on proper termination procedures and the role of business rescue practitioners. Supported by a comprehensive review of case law and academic literature, the paper explores the consequences of non-compliance with termination procedures, stakeholder communication, and the benefits of adopting best practices. The study offers recommendations for future practice and research, including practitioner education, development of guidelines, and comparative studies. This paper contributes to understanding the business rescue process and its potential for success in South Africa.

This literature review provides a critical evaluation of the academic literature on the ethical standards and responsibilities of business rescue practitioners. It discusses the existing research, theories, and evidence in a well-structured and coherent manner, focusing on the role of practitioners, their ethical standards, and the practical implications of these issues in real-life cases.

Background of the Danco Case

The Danco case (2023) is a pivotal example that sheds light on the real-life implications and challenges business rescue practitioners face. The court, in this case, scrutinised the ethical standards and responsibilities of the appointed business rescue practitioner, with a specific focus on the issues related to transparency and disclosure in fee payments. The judgment emphasises the significance of upholding trust and confidence among stakeholders, thereby underlining the necessity for practitioners to adhere to high ethical standards in order to guarantee the effectiveness of the business rescue process.

The Danco case (2023) is situated within a broader context of business rescue literature, which discusses the complexities of practitioners’ roles and the importance of ethical standards (Finch, 2009; Dicker, 2016; Pretorius, 2016). Issues of transparency and disclosure are crucial, as they can impact the legitimacy of the business rescue process (Calitz & Freebody, 2016; Booyens & van Wyk, 2014; Rajak, 2014; Mongalo & van Niekerk, 2016). As such, the Danco case (2023) provides valuable insights into the practical challenges practitioners face when navigating these ethical concerns and their consequences for the business rescue process as a whole.

Importance of Business Rescue in the Financial and Commercial Context (subhead)

Business rescue has emerged as a crucial instrument in the financial and commercial landscape, facilitating the rehabilitation and recovery of companies experiencing financial distress (Pretorius & Rosslyn-Smith, 2014). Serving as an alternative to insolvency proceedings, business rescue endeavours to preserve employment and ensure the ongoing operation of economically viable companies (Wainer & Levenstein, 2011; Bradstreet, 2010). This process plays a critical role in promoting economic growth and stability. Consequently, it requires the appointment of skilled and ethically responsible practitioners who can effectively navigate the intricacies of the process.

The significance of business rescue extends beyond the immediate context of individual companies, impacting the broader financial and commercial ecosystem (Rajak, 2014; Booyens & van Wyk, 2014). Successful business rescue processes can mitigate systemic risks and reduce the potential for negative spill over effects on other businesses and the economy as a whole (Mongalo & van Niekerk, 2016; Calitz & Freebody, 2016). As such, the importance of business rescue in the financial and commercial context underscores the need for diligent and ethical practitioners who can successfully steer distressed companies towards recovery and long-term sustainability.

The Danco Case and the Implications of S 132(2)(c)(ii) (subhead)

The termination of business rescue proceedings is a critical aspect that requires close attention from both legal practitioners and scholars. The Danco case (2023) provides valuable insight into the implications of s 132(2)(c)(ii) and emphasises the importance of adhering to the legal provisions governing the termination of business rescue proceedings. This adherence is crucial to safeguard the interests of various stakeholders and maintain the legitimacy of the process.

The case demonstrated that failure to comply with the requirements of s 132(2)(c)(ii) could lead to adverse consequences for the business rescue practitioner and the affected company, emphasising the need for practitioners to be well-versed in the legal framework (Mongalo & van Niekerk, 2016; Pretorius, 2016). This further underscores the significance of understanding the nuances of termination procedures and their impact on the overall business rescue process.

The academic literature supports the findings of the Danco case, highlighting the complexities involved in the termination of business rescue proceedings and the implications of non-compliance with s 132(2)(c)(ii) (Pretorius, 2016; Mongalo & van Niekerk, 2016). By critically evaluating the material, it is evident that the termination of business rescue proceedings warrants thorough understanding and careful execution to ensure the successful rehabilitation and preservation of economically viable companies.

Case Law on the Termination of Business Rescue Proceedings

The termination of business rescue proceedings is a critical aspect in the legal and commercial context, with various case laws addressing this issue. The Oakdene Square case (2012) and the Southern Palace case (2012) emphasise the significance of proper termination procedures for ensuring a successful business rescue outcome (Bradstreet, 2010; Wainer & Levenstein, 2011). These cases, along with the Danco case (2023), provide valuable insights into the practical implications of the termination process and contribute to the development of best practices for practitioners.

The academic literature supports the findings of these cases, highlighting the importance of compliance with the legal framework governing the termination of business rescue proceedings (Pretorius & Rosslyn-Smith, 2014; Mongalo & van Niekerk, 2016). By critically evaluating the material, it is evident that understanding the nuances of termination procedures and their impact on the overall business rescue process is vital for practitioners seeking to navigate real-life cases.

The Oakdene Square case, Southern Palace case, and Danco case collectively emphasise the importance of adhering to the legal provisions surrounding the termination of business rescue proceedings, in order to safeguard the interests of various stakeholders and maintain the legitimacy of the process. These cases serve as essential references for practitioners navigating the complexities of terminating business rescue proceedings and contribute to the academic literature on this topic.

Importance of Proper Termination Procedures (subhead)

The importance of proper termination procedures in the business rescue context cannot be overstated, as they play a pivotal role in determining the financial and commercial viability of the affected company (Pretorius & Rosslyn-Smith, 2014). Complying with the applicable legal framework during the termination of business rescue proceedings is essential to maintaining stakeholder trust, preserving employment, and promoting the continuity of economically viable companies (Wainer & Levenstein, 2011; Bradstreet, 2010).

Proper termination procedures also provide much-needed clarity and certainty for various stakeholders, including creditors, employees, and investors, who may be directly impacted by the business rescue process (Booyens & van Wyk, 2014; Rajak, 2014). These procedures help address potential conflicts of interest and ensure that the rights and interests of stakeholders are adequately protected throughout the termination process (Loubser, 2013).

By adhering to proper termination procedures, practitioners can foster a more stable and predictable business rescue environment, ultimately contributing to the overall success of the process (Burton & Pretorius, 2012). Additionally, a clear understanding of termination procedures enables practitioners to navigate complex situations and make informed decisions, ensuring the best possible outcomes for the affected company and its stakeholders (Pretorius, 2016).

The literature on termination procedures in the context of business rescue proceedings emphasises the importance of adhering to the legal framework, as well as the consequences of non-compliance (Pretorius & Rosslyn-Smith, 2014; Booyens & van Wyk, 2014). The cases mentioned above, including African Bank Limited v Panamo Properties (Pty) Ltd (2015), Commissioner for the South African Revenue Service v Beginsel N.O. and Others (2016), KJ Foods CC v Standard Bank of South Africa Limited (2017), and Sibanye Gold Limited v CCMA and Others (2018), provide valuable insights into the challenges and complexities faced by practitioners in navigating termination procedures.

The literature further highlights the importance of understanding and adhering to the statutory requirements and regulations governing the termination of business rescue proceedings, in order to protect the interests of all stakeholders, maintain the legitimacy of the process, and promote a stable business rescue environment (Wainer & Levenstein, 2011; Bradstreet, 2010; Rajak, 2014). These cases also underscore the significance of ensuring that business rescue practitioners act in the best interests of the company and its stakeholders, and that they follow proper procedures when it comes to their appointment and termination.

Moreover, the literature emphasises the need for transparency and fairness in termination procedures, particularly in the context of retrenchments during business rescue proceedings (Pretorius & Rosslyn-Smith, 2014; Booyens & van Wyk, 2014). This underscores the necessity for affected companies to comply with applicable labour laws and regulations, even in the face of financial distress, to protect employee rights and maintain stakeholder trust.

Conclusion

The Danco case (2023) has significantly contributed to the understanding of ethical standards and responsibilities in the context of business rescue proceedings. By emphasising the importance of compliance with s 132(2)(c)(ii) and the legal framework governing termination procedures, the judgment highlights the crucial role of ethical conduct in the success of the business rescue process (Mongalo & van Niekerk, 2016; Pretorius, 2016). The case serves as a reminder for business rescue practitioners to prioritise the best interests of the company and its stakeholders, ensuring that their actions align with the applicable laws and regulations (Booyens & van Wyk, 2014; Rajak, 2014).

Furthermore, the Danco case, along with other relevant case law, such as African Bank Limited v Panamo Properties (Pty) Ltd (2015), Commissioner for the South African Revenue Service v Beginsel N.O. and Others (2016), KJ Foods CC v Standard Bank of South Africa Limited (2017), and Sibanye Gold Limited v CCMA and Others (2018), underlines the significance of transparency, fairness, and accountability in business rescue proceedings. This includes the importance of adhering to labour laws and regulations in the context of retrenchments and ensuring that stakeholders are kept informed throughout the process (Pretorius & Rosslyn-Smith, 2014).

Based on the insights gained from the Danco case and the related literature, the following recommendations can be made for future practice and research in the area of business rescue:

• Practitioners should prioritise ongoing education and training to ensure that their understanding of the legal framework governing termination procedures remains current and comprehensive (Wainer & Levenstein, 2011; Bradstreet, 2010).
• Practitioners should maintain open communication with stakeholders, fostering trust and transparency throughout the business rescue process (Pretorius & Rosslyn-Smith, 2014).
• Future research should explore the development of guidelines or best practices for the termination of business rescue proceedings, with a focus on enhancing the predictability and stability of the process (Booyens & van Wyk, 2014; Rajak, 2014).
• Researchers should consider comparative studies examining the termination procedures in other jurisdictions, identifying potential areas of improvement and harmonisation within the South African context (Mongalo & van Niekerk, 2016).

By incorporating these recommendations into practice and research, the field of business rescue can continue to evolve, ultimately enhancing the effectiveness and success of the process and better serving the interests of all stakeholders involved.

Christiaan Herbst is a Management Consultant at SAAC and is the COO of the TMA-SA.