Business Rescue

Question 1

Symptoms of business rescue

Answer 1

Symptoms of Business Distress:
1) Decline in interest Cover
2) Decline in operating margins
3) Decline in cash flow
4) Increased debt to equity ratio
others
1) Falling share prices
2) Resignations or change of management
3) Reduced dividend payout
4) Reduced R&D expenditure
5) plant closure and layoffs

possible cash flow remedies:
1) Restructure loans
2) pay off debt with equity
3) Sell assets to pay off debt
4) mergers
5) Reduces Salaries Overheads

Question 2

Business rescue framework

Answer 2

Business Rescue framework:
1) Temporary supervision under Cipc-appointed practitioner
2) Develop and implement a plan to restructure the business
→ must be done in 3 months
→ progress are sent to the CIPC monthly
consequences
→ No legal action by creditors
→ Can’t sell assets
→ BR practitioner can cancel/repeal/alter contracts
→ Finance providers have first right during liquidation

Question 3

Workouts VS Business Rescue:

Answer 3

Workouts
→ move informal
→ move private
→cheaper
BR
→ allows for multiple negotiations with creditors
→ Public knowledge
→ Creditors can’t all sue

Question 4

Application For Business Rescue:

Answer 4

Voluntary → The Board has a resolution to Apply
Affected persons→
stakeholder, creditors, Employee trade unions
→ high court Application

Question 5

Liquidation

Answer 5

Distribution sequence of proceeds from liquidation
Administrative fees relating to liquidation
Salaries and wages
Outstanding taxes
Secured creditors
Unsecured creditors
Preference shareholders
Ordinary shareholders