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The Importance of Pre-Assessment in Business Rescue

April 16, 2015

The Company’s Act states that the directors of a company need to consider if the company is financially distressed and if there is a reasonable prospect that business rescue will succeed? In order to arrive at an opinion as to whether the business has a reasonable prospect of being rescued, the directors will need to be guided by a suitably qualified and experienced BRP who understands the BR process and nuances from a practical point of view.

Business Rescue is still a relatively misunderstood process outside of the BR industry. In order to fully assess whether there is a reasonable prospect of a rescue being successful, either the board or the affected party bringing the application will need industry knowledge and assistance to assess the reasonable prospect of rescuing the business.

For a Business Rescue Practitioner, the opportunity cost, frustration and the potential loss of the non-recovered fees as a result of a failed business rescue could be significant.

It is thus, in the interest of all parties to take the time to perform a pre-assessment. With increased rates of success of business rescue, the industry itself will also benefit in that only businesses that actually have a reasonable prospect of success will enter the process.

Practitioners should not accept appointments unless they are convinced that there is a reasonable prospect of success.

Extract from TMA-Practice note

Disclaimer: The contents and information provided above are generalised and must not be acted upon as legal advice