Business Rescue 101: An introduction Part 2

In Part 1 of Business Rescue 101, we covered the basics of Business Rescue. We looked at the definition and objectives of Business Rescue, the modes of commencement and requirements for placing a company under Business Rescue as well as the legal consequences of the proceedings.

21 Apr 2020 7 min read Business Rescue, Restructuring & Insolvency Newsletter Article

Now that we covered the basics, in the words of the American soul music artist of the sixties, Shirley Ellis, “let’s get right down to the nitty gritty”.

In this edition, we deal with the appointment of Business Rescue practitioners (BRP’s), the general powers and duties of the BRP, the Business Rescue plan of the company under Business Rescue, post-commencement finance, the ranking of claims against a company in Business Rescue, and the termination of Business Rescue proceedings. It is very important for all role players in the Business Rescue industry, such as BRP’s, creditors, employees, shareholders and directors, to have a good understanding of these topics as it will affect each and every Business Rescue process.

Appointment of the BRP

(i)    Voluntary Business Rescue

Within five days after the board of directors of a company filed the resolution placing the company under Business Rescue, the company, through its board of directors, must appoint a BRP.

The appointment of a suitable BRP is critical to the successful rescue of the business.

When appointing a BRP, a company should consider and “interview” a few BRP’s. It is important that the appointed BRP has the necessary experience in the given business sector. A mining company will for instance need to ensure that the BRP that it appoints, has the necessary experience and knowledge of the mining industry.

The Business Rescue, Restructuring & Insolvency team at CDH has worked with some of the best BRP’s in the country. These practitioners have attended to Business Rescues across all sectors and industries. Our team is also able to assist affected persons (shareholders or creditors of a company, registered trade unions and all employees who are not represented by a registered trade union) to set aside the appointment of a BRP in terms of section 130(1)(b) of the Companies Act 71 of 2008 (Companies Act), on various grounds, including that the BRP is not independent of the company under rescue and/or lacks the necessary skills, having regard to the company’s circumstances.

(ii)    Business Rescue by way of a court order

If a company is placed under Business Rescue by way of a court order, the court may appoint an interim BRP who was nominated by the affected person who applied to court. However, the appointment is subject to the ratification by the holders of the majority of the independent creditors’ voting interest at the first meeting of creditors.

General powers and duties of BRPs

During Business Rescue, the appointed BRP is granted the following powers and duties:


  • The BRP has full management control of the company in substitution for its board and pre-existing management;
  • The BRP may delegate any power or function of the BRP, to any person who was part of the board and pre-existing management.
  • The BRP may remove from office any person who was part of the board and pre-existing management.
  • The BRP may appoint any person as part of the management of a company. However, except with the approval of the court on application by the BRP, a BRP may not appoint a person as part of the management of the company or an advisor to the company or the BRP, or a person related to such person, if that person has any other relationship with the company such as would lead a reasonable and informed third party to conclude that the integrity, impartiality or objectivity of that person is compromised by that relationship.


  • The BRP is responsible for the development of a Business Rescue plan that must be considered and approved by the affected persons (as defined above).
  • The BRP must implement any Business Rescue plan that is approved by affected persons.
  • The BRP must inform all relevant regulatory authorities of the Business Rescue and of an appointment.
  • During the Business Rescue process, the BRP is an officer of the court and must report to the court in accordance with any rules of, or orders made by, the court.
  • During the Business Rescue proceedings, the BRP has the responsibilities, duties and liabilities of a director of the company as set out in section 75 – 77 of the Companies Act.

If a BRP fails to fulfil his/her duties as set out above, an affected person can approach the courts to have the BRP removed as the practitioner in that Business Rescue.

Business Rescue plan

It is the duty of the BRP to prepare a plan for the company, setting out the manner in which it is envisaged that the company will be rescued. The plan must deal with, inter alia, the background of the company, proposals on how the company will be rescued, and assumptions or conditions, if there are any, upon which the plan is based. Section 150(1) of the Companies Act provides that the BRP must consult the creditors and other affected persons, as well as the management of the company, in the process of preparing the plan.

The BRP is required to publish the plan within 25 days of his/her appointment, unless the BRP has been granted permission by the court or the holders of a majority of the creditors’ voting interests for the plan to be published outside the prescribed time limit. 

A Business Rescue plan that is adopted is binding on the company, the creditors of the company and every holder of the company’s securities, whether or not such person was present at the meeting, voted in favour of the adoption of the plan or, in the case of creditors, had proven their claims against the company.

When a Business Rescue plan is adopted, if it makes provision for the company to be released from the payment of its debts to creditors, those creditors are not entitled to claim the balance of their claims against the company, even after the Business Rescue process is terminated and the company is trading as a solvent company again.

Post-commencement finance (PCF)

Section 135(2) of the Companies Act provides that during Business Rescue, the company may obtain financing, and any such financing:

  • may be secured to the lender by utilising any asset of the company to the extent that it is not otherwise encumbered; and
  • will be paid in the order of preference set out in section 135(3)(b) of the Companies Act (the order of preference will be dealt with below).

The Companies Act therefore allows a company to obtain financing during Business Rescue and allows the company to use its assets (to the extent that they may be unencumbered) as security to obtain PCF.

The Companies Act further promotes PCF by ensuring that these claims will have preference “in the order in which they were incurred” over all unsecured claims against the company.

Ranking of claims against a company in Business Rescue

There are two main categories of creditors in a Business Rescue:

  • Pre-Commencement Creditors - Claims that arose before the commencement of the Business Rescue proceedings; and
  • Post-Commencement Creditors -
    (i) Claims that arose after the commencement of the Business Rescue proceedings; and (ii) funding that was made available to a company after the commencement of Business Rescue proceedings for the purpose of enabling the company to continue trading.

The claims of the abovementioned creditors rank in the following order of preference:

  • The practitioner, for remuneration and expenses of the Business Rescue proceedings.
  • Employees for any remuneration which became due and payable after Business Rescue proceedings began.
  • Secured lenders or other creditors for any loan or supply after Business Rescue proceedings began, i.e. secured post-commencement finance.
  • Unsecured lenders or other creditors for any loan or supply after Business Rescue proceedings began, i.e. unsecured post-commencement finance.
  • Secured lenders or other creditors for any loan or supply made before Business Rescue proceedings began.
  • Employees for any remuneration which became due and payable before Business Rescue proceedings began.
  • Unsecured lenders or other creditors for any loan or supply before Business Rescue proceedings began.

Termination of Business Rescue proceedings

Business Rescue proceedings will terminate when:

  • the court sets aside the resolution or court order that began the Business Rescue proceedings or when the court converts Business Rescue proceedings into liquidation proceedings;
  • the BRP files a notice of termination of the Business Rescue proceedings with the CIPC;
  • a plan has been proposed and rejected and no affected person has acted to extend the proceedings in any manner contemplated by the Act; or
  • a plan has been adopted and the BRP has subsequently filed a notice of substantial implementation of the plan with the CIPC.


It is not an easy decision for a board of directors to place a company under Business Rescue. However, in these tough financial and uncertain times where companies may face financial distress, difficult decisions will have to be made, especially, and as discussed in Volume 2 of this Newsletter, to avoid personal liability. 

The Business Rescue, Restructuring & Insolvency team at CDH has specialist knowledge, skills and experience in all aspects of the Business Rescue process. We are available 24/7 to assist and advise all role players in the Business Rescue sector. We reiterate that we can and want to help you during these trying times.

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