Business rescue in South Africa : a critical review of the regulatory environment

Abstract

<p.South Africa lacks an efficient regulatory environment that promotes business rescue. The fact that the introduction of a regulatory environment with modern business rescue principles will be a step forward in making South Africa more competitive and bringing it in line with the modern global economy makes the topic pertinent from both a political and business perspective.At the core of the current discourse regarding business rescue is a fundamental shift in the approach to insolvency, namely that a debtor-friendly approach will encourage early intervention in the affairs of a distressed company. Initiating a state of business rescue without a court order and entering into a moratorium with the resulting impact on the rights of creditors introduces a move towards a debtor-friendly approach. This move in turn presents the problem: What form should the local regulatory environment pertaining to entering a state of business rescue and the automatic take? This report examined international practices and local developments, and includes local research. It puts forward a proposal as to what the minimum requirements for initiating a state of business rescue and the moratorium in a new regulatory environment should be. A summary of the status quo in South Africa, with recommendations, is also presented. It also identifies areas for further research.