A recent YouTube video in which the human resources manager of a logistics company accused the owners of the company of misappropriating Business Rescue (BR) funds has brought the concept into sharp relief.
This after the video went viral in a few days.
Annari Harvey, a BR specialist at Webber Wentzel, explained that BR was a new restructuring mechanism with which all the parties involved were not always familiar.
“There are companies that commence with BR proceedings for the wrong reasons,” she said.
Where there is abuse of the act, Harvey said that one of the available avenues was to approach the court, and bring to the court's attention that the company should not be in business rescue or that the process was being abused.
Harvey added that it was important for the Business Rescue Practitioner (BRP) to disclose as much information as possible to all the affected parties. “It is a very transparent process,” she said. “Companies tend to have a better understanding of business rescue when they decide to use the process.”
Section 129 (3) (b) of the Companies Act states that the company must appoint a BRP within five business days of having adopted and filed its resolution to go into business rescue. The appointed BRP must convene and preside over the first meetings of employees’ representatives (Sec 148) and creditors (Sec 147) within 10 business days after being appointed.
It is the responsibility of the BRP to explain the process and let the employees know what they can expect as well as ensure that all timelines are adhered to. The employees should raise all of their concerns and ask all their questions so that the BRP can help avoid misunderstandings.
Harvey encourages employees to engage with the BRP, as he steps into the shoes of the directors and makes all the necessary business decisions. She also points out that disclosure is important in any transparent process and it is important to follow the statutory processes and timelines as this creates comfort within the process.
“Section 148 of the Companies Act states that the BRP must convene a meeting with the employees 10 days after being appointed,” she said. “This is to help the employees understand the process and engage with them.”
Harvey explained that should a BRP not follow due process, the affected party should place him/her on terms. “If there is still no compliance the disgruntled party can report the BRP to the Companies and Intellectual Property Commission (CIPC.) This should however only be done once all other avenues have been explored,” she said.
