A company may find itself in financial distress for a specific reason or it could be because of an exceptional chain of events, yet the possibility exists that it can still overcome the financial distress in time with cautious planning and careful actions from management.
A company is financially distressed if it appears to be reasonably unlikely that it will be able to pay all of its debts as they become due and payable within the immediately ensuing six months; or if the company is likely to be insolvent within the immediately ensuing six months.
The Companies Act No.71 of 2008 (hereafter “The Act”) aims to provide a measurement of “relief” to companies that is heading towards misfortune and only needs some time and skillful intervention to get back into business. This is referred to as “business rescue proceedings” and is directed by Chapter 6 of the Companies Act. Business rescue is defined as proceedings to rescue and rehabilitate a financially distressed company.
Business rescue proceedings may be initiated by either the company itself when the board of directors resolves that the company should voluntarily begin business rescue proceedings and is placed under supervision, or it may be initiated by an affected person through application to the court for an order to place the company under supervision and to commence business rescue proceedings. Consequently to placing a company under business rescue, a business rescue practitioner must be appointed. Nexia SAB&T have qualified business rescue practitioners and as such offers this service.