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Business rescue isn't a bad thing!

by , 07 March 2013
Business rescue has a bad reputation. But it's the best way to stave off liquidation and save the jobs of your employees. So if your business is suddenly struggling to make ends meet, it could be placed under business rescue like discount fashion chain Meltz. And you don't have to wait for someone to step in - you can volunteer for business rescue if your accounting records paint a dismal picture. Here's what you need to know...

Business rescue practitioner Leslie Matuson of Matuson & Associates was appointed to Meltz in mid-February, and says the business rescue process can be successful, but time is of the essence in recapitalising or finding a buyer, says Moneyweb.
 
So while being placed under business rescue is usually seen as a bad thing, it actually offers hope.
 
Because business rescue beats facing liquidation.
 
And the Tax Bulletin says business rescue could be indirectly responsible for the 71% drop in local year-on-year liquidation figures in 2011.
 
So it's crucial – but you'll still have certain financial obligations to meet. 
 
For example, you'll still meet the requirements of the Vat Act by accounting for input tax and output tax if your business is placed under business rescue, says FSP Business.
 
You'll still have to meet these financial obligations if you're place under business rescue… but you could see some money back from SARS for doing so!
 
 You'll still have to pay back debts owing to your suppliers going a year or more. 
 
For example, if you haven't paid the full amount for a previously claimed input tax deduction within 12 months, you'll need to account for output tax for the amount still outstanding.
 
But this is a good thing.
 
Because one you've paid it, you can claim an input tax deduction for this from SARS, equal to the tax fraction of the amount subsequently repaid.
 
So you'll even get some money back from SARS
 
The Business Day's BD Live website adds that just more than half of all business rescue applications result in a happy outcome, steering away from liquidation.
 
But beware of applying for business rescue if your company doesn't face liquidation without it.
 
You'll get in trouble for applying for business rescue if you don't really need it…
 
Because the courts are already dealing with the abuse of the business rescue system, where companies are simply looking for a 'debt holiday' and to just restructure their credit arrangements.

This could result in penalties like hefty fines you just can't afford, so don't even consider it.
 
There you have it. Business rescue could be just what you need to turn around the dismal financial state of your business.
 
 

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