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The Business rescue practitioner

February 7, 2017

Business rescue have placed a major responsibility on creditors, directors and shareholders of distressed companies to “come to the rescue” of companies in financial distress.

The decision on who to employ as a business rescue practitioner is therefore one of the most crucial decisions a distressed company can make. It is therefore in the interests of the company and all affected parties to appoint a practitioner with the necessary skills and expertise.

The Act states that for a person to be registered as a practitioner he must:

  • Be a member of good standing of a legal, accounting or management profession.
  • Not be subject to an order of probation and would not be disqualified from acting as a director of a company
  • Be independent and may not have a previous relationship with the company.

In my opinion a practitioner needs to have experience in at least three different sectors namely: management, law and finance. He also needs to be ethical and operate from a transparent perspective at all times.

It is important that the practitioner needs to work in co-operation with the existing management team in an effort to formulate a rescue plan that will be acceptable to the creditors and other affected parties who has to decide if the plan is acceptable or not.

A practitioner must also have legal experience and intimate knowledge of Chapter 6 of the Companies Act. The practitioner needs to understand the law of insolvency in order to assess each creditor’s claim.

Thirdly an important skill that a practitioner must have is a reasonable level of financial acumen. The practitioner must, be able to understand and analyse the financial side of the company. However the practitioner may appoint a consultant to assist him herewith.

It is therefore essential that the practitioner possesses or has proper access to all the necessary practical skills and experience to take on the tremendous responsibilities inherent in the position of rescuing a company in destress.

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances