Webinar by C Klokow of CIPC giving an overview of Business Rescue Proceedings in South Africa. Business Rescue cc is based in Pretoria, South Africa. More info on the company can be found on their website: http://www.businessrescue.co.za/

1. Webinar
Introduction to Business Rescue
Proceedings
Version 1.0
Prepared by C Klokow

2. Purpose of Presentation
This presentation does not provide detail of the full business rescue
legislative process and requirements
The presentation is aimed to create awareness of business rescue
as an available option to “save” an ailing business

3. Legislative Framework
•Chapter 6 of Companies Act, act no 71 of 2008;
•Companies Amendment Act, act no 3 of 2011; and
•Companies Regulations, 2011

4. Mandate and Purpose
Chapter 1, Part B states:-
“The purpose of this Act are to –
(k) provide for the efficient and responsible rescue and
recovery of financially distressed companies, in a manner that
balances the rights and interests of all relevant
stakeholders; “
Chapter 6 of the Act 2008 introduces principles relating to corporate
rescues which brings us into line with international principles of
turnarounds and corporate rescue as they exist in foreign jurisdictions.

5. Functions of CIPC relating to Business
Rescue
Manage and record the filing of relevant notices:-
•The accreditation of professional bodies
•Licensing of individuals that meet the criteria of the Act;
•Monitor patterns of compliance
•Promotion of business rescue provisions of the Act and
•Raise awareness

6. Definition - Business Rescue
Definition of Business Rescue:
Proceedings to facilitate the rehabilitation of a company (or close corporation)
that is financially distressed by providing for:
• Temporary supervision of the company, and of the management of its affairs,
business and property
• Temporary moratorium on the rights of claimants against the company or in
respect of property in its possession
• Development and implementation, and approval of a business rescue plan to
(1) rescue the company by restructuring its affairs, business, property, debt
and other liabilities to continue on a solvent basis OR
(2) If not able to continue, results in a better return for the company’s
creditors or shareholders than liquidation

7. Purpose of Business Rescue
Purpose of Business Rescue:
Restructuring the business in order for it to continue in existence OR
Better return for the company’s creditors or shareholders than liquidation
Thus business rescue can also
be used as an alternative to
liquidation

8. Conditions for Business Rescue
Company or close corporation resolves to commence business rescue:
• The board resolves (section 129)
• directors and not the shareholders (company)
• Members (close corporation)
• If reasonable grounds that:-
(1) Financially distressed AND
(2) Reasonable prospect of rescue
• May not be adopted if liquidation proceedings have been initiated
• Court has not issued court documents to start the legal process of placing it into
liquidation
• Resolution has no force or effect until it has been filed
• Company or close corporation may approach court to convert from liquidation to
business rescue (section 131)
If no reasonable
prospect - liquidation
CIPC will confirm date of filing once
minimum legal requirements have
been confirmed

9. Creditors or other affected parties may apply
to court to place the company or close
corporation into business rescue including
trade unions

10. Definitions – Affected Person
Affected person:
Any person that is affected by the company and includes:
• Shareholder
• Creditor
• Registered trade union representing employees
• Employees representatives (if no union)

11. Definition – Financially Distressed
Financially distressed:
It appears to be reasonably unlikely that the company will be able to
pay its debts as they become due and payable within the
immediately ensuing six months
= commercial insolvency

12. Business Rescue Proceedings Life
Cycle

13. Procedures to start business rescue
proceedings
Business rescue proceedings begin when:-
(1) the Board passes a resolution that the company voluntarily begin Business
rescue proceedings (section 129); OR
(2) an affected person (shareholder, creditor, employee or organised labour),
applies to court for business rescue proceedings (section 131)

14. Board Resolves
Entity:
Board Resolves
(resolution)
Entity:
Submit
CoR123.1
CIPC:
Confirms
correctness and
effective date
Entity:
Give notice to
affected parties
of
commencement
of BR
proceedings
Entity:
Appoint BRP
Entity:
Submit
CoR123.2
CIPC:
License BRP
and confirms
appointment of
BRP
Entity:
Give Notice of
Appointment of
BRP
5 working days from
resolution
New matters SDS:
2 working days from receipt provided
that minimum legal requirements are
complied with
5 working days from
resolution 5 working days from
resolution
2 working days from
appointing BRP 5 working days from
filing CoR123.2
Appointment SDS:
2 working days

15. CoR123.1 and Supporting Documents
Two sets of information – legal requirements and administrative requirements
Legal documents to be submitted (legal requirements):
• Duly completed and signed CoR123.1
• Affidavit / sworn statement and
• Resolution
• Resolution must state (i) entity is financially distressed and (ii) entity
resolve to commence business rescue

16. CoR123.1 and Supporting Documents
Administrative documents to be submitted (admin requirements):
• Certified ID copy of owner of the customer code
• Certified ID copy of the director/member undertaking the sworn statement
• Letter from the business stating the PI Score, primary business activities and
nomination of business rescue practitioner and
• Letter from business rescue practitioner declaring his / her capacity to accept
nomination, independence from the business and that not disqualified

17. Sworn Affidavit
Sworn statement must inter alia contain:-
• Full name, surname and id number of person undertaking the sworn statement
• Reasons for resolution to start business rescue proceedings (what caused the
financial distress or cash flow problems e.g strikes, loss of contracts)
• How the owners aim to rescue the business
• Physical address where most of the business activities in the current financial
year were undertaken
• All legal proceedings the entity is involved in, the nature of such proceedings
and status thereof

18. Important information
E-mail address: businessrescue@cipc.co.za
Not advisable to manually submit due to time constraints and ease of contacting customer
Service Standard: 2 working days
Fee: No prescribed fee
Once processed, a stamped copy of the CoR123.1 and other documents will be e-mailed
to person who submitted the application
Enquiries: Must be logged on CIPC website www.cipc.co.za / enquiries

19. Legal Consequences: Non
compliance with notification periods
• Business rescue proceedings commence on the date the application,
consisting of the minimum legal documents, was submitted to the CIPC
• If preceding liquidation proceedings, the resolution to commence
business rescue proceedings are void ab initio
• If no notice of appointment of BRP is provided within stated period, then
proceedings become a nullity
• If resolution and effective date is not published within stated period, then
proceedings become a nullity
• If proceedings became a nullity then entity cannot resolve the commence
business rescue again for another 3 month period

20. Legal Consequences: Objection to
resolution to commence business rescue
• Any time between adoption of resolution and approval of business rescue
plan, any affected person may apply to court (section 130):-
(i) setting aside the resolution;
(ii) setting aside the appointment of the practitioner; or
(iii) requiring practitioner to provide security
• Director or member who voted in favour of the resolution may not apply to court
to set aside the resolution or appointment of practitioner
Unless proof to court that acted in good faith on basis of information that has
been found to be false or misleading

21. Once business rescue commence and
business rescue practitioner is appointed, all
management powers are relinquished to the
business rescue practitioner

22. Legal Consequences: Handing over of
management function to BRP
• Each director and member:-
(i) Must continue to exercise the functions of director, subject to the authority of
the BRP
(ii) duty to exercise any management function within the company in accordance with
express instruction or direction of BRP
• Each director must attend to the requests of the BRP at all times, and provide BRP
with any information about the affairs of the business
• Any action that required approval of BRP is void unless approved by BRP
• BRP may apply to court for order removing a director and the ground that director has
(i) failed to comply with requirements of Chapter 6 (Business Rescue Chapter); or
(ii) by act or omission, has impeded or is impeding
(a) the BRP in the performing his powers and functions
(b) the management of company by BRP; or
(c) the development or implementation of business rescue plan

23. Legal Consequences: General
• General moratorium is affected (section 133)
• Protection of property interest (section 134)
• Employees immediately before beginning of business rescue continue to be so
employed on the same terms and conditions (section 136)
• Labour Laws are not affected and therefore such procedures must be followed in
the renegotiate of conditions of employment and retrenchment
• BRP may suspend any obligation of the company (section 136)
• Cannot suspend employment contract

24. Nullity
If proceedings became a nullity – letter from BRP stating the reasons for the nullity
Possible reasons for nullity:
• BRP not appointed with required or extended time period
• Publication and notification of starting of BR or appointment of BRP did not
occur in time
• Not all known affected parties were notified of BR or appointment of BRP
• At time of resolution, liquidation proceedings has already initiated

25. Court Order
Court:
Makes Order to
commence BR
and may
appoint interim
BRP
Entity/affected
person:
Submit
CoR123.1 and
Court Order
CIPC:
Process Court
Orders
Entity:
Give notice to
affected parties
of
commencement
of BR
proceedings
Entity:
Appoint BRP
Entity:
Submit
CoR123.2
CIPC:
License BRP
and confirms
appointment of
BRP
Entity:
Give Notice of
Appointment of
BRP
2 working days 2 working days
5 working days from date of order

26. Business Rescue Proceedings Life
Cycle

27. Assessment of Entity Affairs
• As soon as appointed the BRP must investigate the affairs of the entity
• Directors and members must fully disclose the position of the business to the BRP by
making all relevant documents to the state of affairs of the entity available (section
142)
Outcome of assessment:
• If entity not distressed – CoR125.2
• If entity too distressed – apply to court for discontinuing BR proceedings and
commencing liquidation
• If entity distressed and reasonable prospect to rescue – have meetings with
creditors and prepare BR plan for approval by creditors

28. Documents to be submitted
If BRP is going to apply for discontinuation of BR proceedings and placing entity into
liquidation, it is not advisable for the BRP to submit CoR125.2 (notice of termination)
• As soon as CoR125.2 is submitted and processed by CIPC the BRP proceedings
terminate and the BRP has no authority to approach the court to finalise the
discontinuation of the proceedings.
Court order - businessrescue@cipc.co.za

29. Important information
E-mail address: businessrescue@cipc.co.za
Not advisable to manually submit due to time constraints and ease of contacting customer
Service Standard: 5 working days
Fee: No prescribed fee
Enquiries: Must be logged on QRS

30. Business Rescue Proceedings Life
Cycle

31. Business Rescue Plan
• BRP, after consultation with creditors, affected persons and management, must
prepare a plan that maximises the likelihood of the business continuing in
existence on a solvent basis OR results in a better return for the business’s
creditors or shareholders
• Plan must then be voted on by creditors and, if applicable, by shareholders
• Plan not adopted, and no affected person took further action to approve plan,
BRP must file a notice of termination (CoR125.2) with CIPC

32. Important information
E-mail address: businessrescue@cipc.co.za
Not advisable to manually submit due to time constraints and ease of contacting customer
Service Standard: 5 working days
Fee: No prescribed fee
Once processed, a stamped copy of the CoR125.2 and other documents will be e-mailed
to person who submitted the application
Enquiries: Must be logged on the CIPC website, www.cipc.co.za / enquiries

33. Once business rescue plan is approved
(agreement between business and creditors),
the business rescue practitioner implements
to plan based on its provisions which creditors
approved

34. Business Rescue Proceedings Life
Cycle

35. Implementation of Plan
Once plan is approved, the BRP must implement such plan
If BR proceedings takes longer than 3 months, CoR125.1 must be submitted on
month 4 and every month thereafter
CoR125.1 may be accompanied by a more detailed report

36. Important information
E-mail address: businessrescue@cipc.co.za
Not advisable to manually submit due to time constraints and ease of contacting customer
Service Standard: 5 working days
Fee: No prescribed fee
Once processed, a stamped copy of the CoR125.1 and other documents will be e-mailed
to person who submitted the application
Enquiries: Must be logged on CIPC website, www.cipc.co.za / enquiries

37. Business Rescue Proceedings Life
Cycle

38. Substantial Implementation
Once BRP has substantially implemented the BR Plan, CoR125.3 must be submitted
CoR125.3 must be accompanied by the latest PI Score of the entity at the time of
resolving that plan was substantially implemented

39. Important information
E-mail address: businessrescue@cipc.co.za
Not advisable to manually submit due to time constraints and ease of contacting customer
Service Standard: 5 working days
Fee: No prescribed fee
Once processed, a stamped copy of the CoR125.3 and other documents will be e-mailed
to person who submitted the application
Enquiries: Must be logged on CIPC website, www.cipc.co.za / enquiries