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Two ways your business can be placed under business rescue

by , 13 February 2014
Is your business in financial distress? If so, continue reading to find out the two ways your business can be placed under business rescue.

The business rescue process can either be:

  1. Voluntary and
  2. Not voluntary.

Let's take a closer look at each of these.

Two business rescue methods explained

#1: Voluntary business rescue proceedings. Section 129 of the Companies Act talks about voluntary business rescue proceedings.

This happens when you and your board of directors pass a resolution that states you want to start business rescue procedures.

#2: Non-voluntary business rescue proceedings. These proceedings are usually instituted by affected person (i.e. creditor or third party who your company owes money to).

This simply means the affected party can make a formal application in court for an order to place your company under business rescue proceedings.

There's really no need to wait for a situation where a third party makes an application to place your company under business rescue.

'At the first signs of financial distress, start with business rescue proceedings,' says the Practical Accountancy Loose Leaf.

Remember that the concept of business rescue is to help your company to avoid liquidation. You certainly don't want become another statistic. We told you not so long ago that over 3 766 businesses are liquidated every year in South Africa.

Your financially distressed business can get these three benefits from business rescue.

The Loose Leaf outlines three benefits of business rescue:

  1. Temporary company and management supervision to get your affairs in order;
  2. Temporary hold on claims from creditors or repossession of property; and
  3. A business rescue plan that details how to get into a better cash flow position.

Now that you know the two ways your business can be placed under business rescue, check out this article. It has five steps to follow when you apply for business rescue.

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