A company can enter business rescue either voluntarily through a board resolution or by court application brought by an affected person. The Companies Act governs both processes and aims to rehabilitate financially distressed businesses through restructuring and legal protection.
A company should consider business rescue when it becomes financially distressed, and there is a reasonable prospect of recovery. The business rescue requirements focus on both financial distress and the likelihood of achieving a better outcome for creditors than liquidation.
Business rescue is a legal process under South Africa’s Companies Act that helps financially distressed companies restructure their affairs, avoid liquidation, and achieve a better outcome for creditors, employees, and shareholders.
Business rescue aims to rehabilitate a financially distressed company and preserve value. In liquidation, the company is wound down, and its assets are sold to repay creditors when there is no reasonable prospect of saving the business.