A critical analysis of the requirements needed for the commencement of business rescue in South Africa.

Abstract

The ripple effects of COVID 19, the rise of inflation, interest rate hikes, and the negative effects of the Russia-Ukraine war are some of the reasons that have led to the poor performance of global economies. South Africa is no exception to the negative impacts of these global challenges. South Africa, which is still a young democracy, faces unique challenges such as load-shedding. Load-shedding has adversely impacted all businesses that are being forced to operate at a loss because of the additional costs they are incurring to procure alternative electricity sources to keep their businesses operational. Interest rate hikes have also impacted South African businesses to the extent that they have been described as a ‘punch to the gut for businesses already struggling. These challenges bear negative consequences on the South African economy at large because both small and big businesses may be forced to default on their payment obligations due to insolvency. Insolvency usually results in businesses being placed in liquidation, which may result in their ultimate closure and job losses. To avoid this, South Africa, like other countries, has adopted a corporate rescue process as an alternative to liquidation proceedings. This corporate rescue process is commonly referred to as ‘business rescue’, and it is necessary to analyse its requirements to ensure that the maximum potential of this process is realized and that companies benefit more from it