Business Rescue and Solvency!
Business Rescue and Solvency Gone are the days when unsuccessful business owners jump from the one business to the other and let their creditors pay for their anyway. mistakes. Well, in theory The New Company Act requires directors of companies to take certain steps when the company they are a director of is going downhill and is heading for a position where
• the liabilities will exceed its assets (insolvent) • the company is unable to pay its debts in the normal course of business. Please note the action should be taken before the company is insolvent Once it is insolvent it is too late. Business rescue proceedings also apply to Close Corporations, but not to sole proprietors, partnerships or business trusts. The steps to be taken are called Business Rescue Proceedings. What this entails is that the company applies for a business rescue. A business rescue practitioner is appointed to take over the running of the business for a period of up to three months to see whether they can turn it around. While they are running the show the current directors are subject to their authority. What if a director does not apply for business rescue? If a director of a company allows the company to trade while insolvent and hasn’t applied for business rescue proceedings before the company became insolvent, the director is personally liable for the debts of the company. If you would like more information about the steps to follow to institute business rescue proceedings, the effect it has on employment contracts, on creditors etc. please give us a call for more information.