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If 2014 was a bad financial year, you might need business rescue. Here's how to apply for this lifeline in five easy steps

by , 11 December 2014
If 2014 was a bad financial year for your company, you might find yourself looking at liquidation.

But, this isn't your only option. You can reach out for business rescue to help save your business from foreclosure.

If you've never heard of business rescue and don't know how to get this help, then let me explain...

 

Here's how to apply for business rescue in five easy steps

 
Step # 1: If you want to start business rescue procedures, go to your board of directors and ask them to pass a resolution saying you can. 
 
If you have an expert in mind to do this, include this in the resolution. Explain why you're applying for business rescue in the resolution too. 
 
Step # 2: Next you have to fill in a CoR123.1. This is a notice to the Companies and Intellectual Property Commission (CIPC) saying you're starting this process. Fill this in within five working days of passing the resolution. Include certified copies of the directors' IDs when you submit this form. Submit the completed CoR123.1 at your nearest CIPC offices. 
 
You can find a copy of the CoR123.1 here.  
 
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Step # 3: Publish a notice of the resolution the directors passed. Describe the procedure to anyone affected by it in this notice in the newspaper or a local paper.
 
Step # 4: Appoint a business rescue expert. You need to do this within two days of filing the proceedings. Fill in a CoR123.2 form and submit it to the CIPC to show who you appointed. Download the CoR123.2 form here
 
Step # 5: Publish a notice in the local newspaper or press saying who you appointed. Do this within five days of appointing him. There isn't a specific format you need to follow with this notice. 
Besides publishing the notice, make sure you notify anyone else this decision affects.
 
There you have it! But remember, you have to stick to these time-frames.
 
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Directors' duties according to the new Companies Act
 
Did you know that being a company director nowadays is not what it used to be? Gone are the days when the title of 'company director' was just a label that brought prestige, extra income and few duties. Today's director faces:
 
Daunting duties, e.g. directors may only use their powers (which have been given to them as directors) to benefit the company;
Hefty responsibilities, e.g. the director must act how a reasonable director would act. Gone are the days when if you were a director, and if something went wrong you could hide behind the excuse: 'But I'm not qualified to do this job!' Under the new Companies Act, if you're going to be a company director, you're going to have to get clued up!
Potentially serious liabilities – going to jail for 10 years is just one such liability.
 
 
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Here's why you have to stick to these time-frames when you apply for business rescue

 
You have 12 working days from the time you start a business rescue procedure. It's important to stick to the time-frames during this process that I've detailed in the above five steps (Companies Act). If you don't, the courts will scrap your application. This means you can't apply for another business rescue for three months unless the court approves it! By then, it might be too late for your business.
 
Just be careful! The business rescue process takes three months to complete. If you might have to liquidate in less than three months, there's no point in applying for business rescue! 
 
Rather investigate the option of business rescue when you first see serious problems in your finances. This way, you can quickly take the right steps before you get to the point of liquidation.
 
For example, if you're a shop owner, sell off as much of your stock as you can during the process so you can stay open. 
 
But if you're a property developer, for example, you don't have stock to sell. That means you'll have to start the process sooner. Otherwise, you might have to liquidate before you get to the end of the business rescue process. 
 
If you do all this correctly, you can get the help you need to keep your business open and get back on your feet. 
 
You can get more information about business rescue in the Practical Accountancy Loose Leaf Service
 


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