Business rescue can also sink your business
Business owners should urgently take note of the provisions of the new Chapter 6 of the Companies Act, not only when their own business is in fi nancial distress, but also when one of their customers or tenants (in the case of a landlord) goes into business rescue.
Most companies have not yet given attention to this important aspect and most probably will only deal with it once they have learnt the hard way – realising that it could have been avoided. The question is, what should you do when one of your clients/tenants enters into business rescue or if your own company finds itself in financial distress? They should, with the assistance of a business-rescue specialist, prepare a policy in order to avoid personal liability, the appointment of the wrong practitioner and other serious pitfalls.
Lease and other agreements, credit applications and surety documents have to be updated, changed and adapted. Businesses could fi nd themselves in the unfortunate position of not being able to claim from a tenant or surety, simply because they have not made the necessary changes to their standard documentation. This can be avoided, potentially saving thousands of rand. The standard lease agreements and surety documents do not make provision for the event of business rescue and could have the effect that it could, as a creditor, be bound by the moratorium provided for in business rescue.
Debtors collection procedures must also be adapted and staff in credit departments trained to deal with the new business rescue proceedings. Finally a business-rescue policy should establish company procedures to ensure that any sign of possible financial distress be timeously identified and act upon in such a way that personal liability by members and directors are avoided. The new Act has very strict responsibilities regarding director’s conduct in financial distressed
situations. Something that any business owner, member or director can ill afford to ignore. Visit the website for more articles and information www.bvrbusinessrescue.co.za
