How Business Rescue is a Lifeline for South Africa’s Struggling Companies

Prolonged economic challenges continue to put pressure on South African businesses, making proactive financial management even more critical. As an organisation that has assisted with asset disposal in hundreds of Business Rescue and Liquidation matters, Park Village Auctions (PVA) suggests that financially distressed companies should consider business rescue as a viable alternative to liquidation.

Business rescue is a legal process governed by Chapter 6 of the Companies Act and is designed to rehabilitate a company. Failing this, the process most often secures a better outcome for all stakeholders compared to immediate liquidation.

Says PVA’s Roy Lazarus, “Business rescue provides a crucial moratorium on legal action, giving a qualified practitioner the time to restructure the business. This is not giving up but instead taking a decisive step to save a viable business and the jobs that depend on it.

“A report by Werksmans Attorneys in late 2023 indicated a positive trend, with 36% of terminated business rescue cases achieving successful outcomes. This demonstrates that with early intervention and sound strategy, companies can turn their fortunes around and return to solvency.”

However, Lazarus cautions that not all businesses are capable of being rehabilitated under the Business Rescue process. “It is not a case of one glove fits all. Business Rescue does not suit every type of business. An experienced liquidator or business rescue practitioner would advise whether the business can be rescued or not.”

A key component of a successful business rescue plan often involves the disposal of non-core assets to generate capital. For this, auctions are the preferred vehicle due to their transparency, speed, and ability to maximise returns.

“An auction creates a competitive environment, driving up prices and ensuring the best possible value for creditors. The process is also swift and without the suspensive conditions that often delay private sales, providing a much-needed cash injection exactly when the company needs it most.” Lazarus explains.

Park Village Auctions has been trusted with hundreds of business rescue matters over the years. This includes high-profile cases, most recently that of Confident Concept (Pty) Ltd. According to Lazarus, the company’s proven proficiency across a wide range of asset classes gives business rescue practitioners and creditors confidence that they will achieve the best possible result.

“Business rescue is a powerful tool for rebuilding and recovery,” says Lazarus. It offers a clear path to a new beginning for businesses and a hopeful message to the people who rely on them.”