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African Bank's retail arm Ellerines applies for business rescue - here's how this process works

by , 11 August 2014
The collapse of African Bank Investments Limited, otherwise known as Abil, is the biggest story in the business world right now. The company that was once the darling of the stock market is crumbling and its share price sunk to new lows last week.

The latest development regarding the troubled unsecured lender is that it'll receive a R10 billion capital injection to stave off collapse and creditor protection after the South African Reserve Bank stepped in to help save the business, reports Money Web.

Another development is that it's furniture retail arm, Ellerines, is applying for business rescue. Abil has cut off its funding due to losses.

Your company isn't immune to what Ellerines is going through. So while you watch how things pan out at African Bank, take the time to find out how business rescue works so you can use this process should your company find itself in a similar situation.

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Here's what you need to know about business rescue

Experts behind the Practical Accountancy Loose Leaf Service say if your company or CC is in financial distress and needs rehabilitation, business rescue is your salvation

Basically it means that, if your business is insolvent and you're still trading, you can restructure and reorganise it through business rescue.

The first step to follow when you apply for business rescue is that you and your board of directors must pass a resolution that says you want to start business rescue procedures.

Check out this article, it contains all the five steps you must take to apply for business rescue.

Another important part of business rescue is your company must appoint a business rescue practitioner. He'll investigate your business affairs, processes, property and financial position and draft a plan to get your company out of financial trouble. (In terms of the law, he has three months to turn your business around.)

The great thing about applying for business rescue is you'll reap these three benefits

  1. You'll get temporary company and management supervision to get your affairs in order;

  2. There will be a moratorium in respect of creditors. This will give your business breathing space to work out a rescue plan without the ongoing pressure from creditors; and

  3. You'll have a business rescue plan that details how to get into a better cash flow position.

There you have it. If you find yourself in Ellerines' shoes, business rescue is an option.

Now that you have a basic idea of how it works, we recommend you check out the Practical Accountancy Loose Leaf Service. It'll tell you how to appoint a business rescue practitioner, explain your duties during business rescue and so much more.

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