It’s a common misconception that business rescue is a relatively new concept, introduced only with the SAA business rescue or the liquidation of Comair. In reality, this profession has a long-standing history, and its contributions have been instrumental in bolstering the South African economy, offering a beacon of hope in times of financial distress.
Belinda Scriba, Director of our Dispute Resolution practice, joined Aviwe Mtila on eNCA, where she discussed Understanding the history and significance of business rescue in South Africa.
Scriba says that the idea of rescuing businesses is not a new concept in South African company law. Before business rescue came into effect, we had the process of judicial management, which was designed to achieve a rescue of sorts for businesses in financial distress, allowing businesses some breathing room to start trading back to solvency again as opposed to the death sentence of liquidation.
Scriba adds, however, that for various reasons, judicial management wasn’t very effective and was generally seen as an unsuccessful mechanism. Thankfully, business rescue addressed many of the underlying reasons judicial management was not as successful as was hoped, thereby making it a much more effective rescue tool than existed under the old Companies Act.
Scriba also notes that one of the main advantages business rescue has is that a company can place itself into business rescue without requiring court proceedings. This was not possible under the old judicial management regime, and this was one of the reasons it was not very effective. The courts were very strict in granting judicial management over liquidation proceedings, favouring instead the latter unless there were exceptional circumstances justifying the former.
