CRS Business Rescue
Overview of business rescue in South Africa - the context, process, and stakeholders

Business rescue implementation and operational status in South Africa

Status of accreditation of professions and licensing of business rescue practitioners

Statement by Advocate Rory Voller, Acting Commissioner, Companies and Intellectual Properties Commissioner on 1 July 2011

The Companies Act No 71 of 2008, (the Act) allows for two ways to become a business rescue practitioner namely:

1) the accreditation of a profession as intended under section 138(1) of the Act, and

2) applications from any person who wishes to apply to the Commission to be licensed and is eligible to be appointed as a business rescue practitioner in terms of section 138(1 )(b).

The accreditation of the mentioned professions being legal, accounting and business management has been discussed with various organizations, such as Law Society of South Africa, the Association of Insolvency Practitioners of South Africa and the Turnaround Management Association.  It is envisaged that when applications are received from professional bodies that they must provide sufficient information about the qualifications and experience that are set as conditions for membership and further that its members or a group or category of members demonstrate suitability and have relevant qualifications to perform the functions of a business rescue practitioner.  The professional body must also show it has the ability to discipline its members.  An accreditation model will be developed and round table discussions with reference groups will take place within the next three weeks.

The licensing of individuals to act as business rescue practitioners has started, and as an interim measure conditional licenses are granted. There were no mayor delays as the Act came into operation on 1 May 2011 and the newly established Companies and Intellectual Property Commission (CIPC) opened its doors on 3 May. The first application that was filed with the CIPC is dated 24 May and the first license issued is dated 29 June 2011.

The applicants come mainly from audit and legal firms that have previously engaged in corporate renewal and turnaround management strategies. The regulations prescribe the requirements to some degree and others are contained in the guidelines that are attached to my response.

The CIPC has decided to thoroughly investigate the turnaround practices locally and internationally before final licenses are granted to appropriate applicants to execute business rescue proceedings.  It is also envisaged that a workshop will be arranged with relevant stakeholders to ensure proper consultation on the guidelines and requirements when such licenses are issued.

In the interim all businesses that make a decision to start rescue proceedings can file notices prescribed in the Act with the CIPC and identify a prospective practitioner that will be considered to be licensed on an urgent basis.  Such interim licences will be granted for a limited period and will relate only to that specific business. Several licences granted on this basis have been issued.

It was also further decided that an extension and condonation of time limits in regard to appointment of business rescue practitioners will be granted, as prescribed under Regulation 166 (1) of the regulations published on 26 April 2011, in cases where suitable rescue practitioners cannot be appointed in time.

Status of accreditation of professions

The process for accreditation of professions, as described by the Acting Commission of CIPC above, is still under way.

Overseas, in the UK for example, it does occur that members of accredited law and accounting professions are allowed to be insolvency practitioners, not because their members or group or category of members demonstrate suitability for business rescue, but simply because it the authorities, who don't regulate practitioners directly, leave regulation of practitioners in terms of admission criteria and disciplinary measures to the associations.

Should professions be accredited?

It is our view that none of the organisations viz. Law Society of South Africa, the Association of Insolvency Practitioners of South Africa, the Turnaround Management Association of Southern Africa, or the South African Institute of Chartered Accountants should be accredited.

The reason is simply that in our view, no association can argue that its members or a group or category of members demonstrate suitability and have relevant qualifications to perform the functions of a business rescue practitioner.

No South African degree in law, accounting or business administration, or certificate in insolvency, is a suitable qualification that will equip a graduate to perform the functions of a business rescue practitioner.  These degrees are either too narrow (law, accounting) or too broad (MBA) or irrelevant (certificate in insolvency).

How soon will a suitable turnaround qualification be available?

We believe that a suitable qualification can be the Certified Turnaround Professional (CTP) qualification that will be offered by the Turnaround Management Association - Southern Africa in late 2011 or early 2012. To become a CTP, a candidate must:

  • Demonstrate business turnaround practice experience in line with what is required by CIPC for junior, experienced and senior business rescue practitioners.
  • Pass exams in turnaround management, law (including Chapter 6) and turnaround-related finance/accounting.

The CTP Governance Board will be chaired by Professor Mervyn King, with Judge Ralph Zulman the one Deputy Chair.

The CTP Governance Board has a Standards Subcommittee for purposes of admission and discipline, and an Education Subcommittee consisting of leading academics in their fields to provide a body of knowledge and examinations e.g. Professors Anneli Loubser, Marius Pretorius, Ebo Oost, David Burdette and Neil Harvey, as well as Frans van Heerden of Wits Business School and Jan van der Walt, doctoral student in business rescue.

Continued Education of the University of Pretoria will administer the certification process in terms of study materials, lectures and exams.

The first CTP exams are expected in late 2011 or early 2012.

Interim licensing of business rescue practitioners

The CIPC has decided to first thoroughly investigate the turnaround practices locally and internationally before final licenses are granted to prospective business rescue practitioners.

Requesting licensing of business rescue practitioners on an urgent basis

To be registered as a interim licensed business rescue practitioner, a prospective business rescue practitioner must have himself or herself identified as the earmarked business rescue practitioner in an official letter addressed to CIPC from the company or close corporation commencing business rescue proceedings, requesting licensing on an urgent basis.

When to apply for an interim business rescue practitioners license:

The detailed process to apply for an interim license is described at The official CIPC business rescue practitioner registration application process for interim licensed business rescue practitioners

Extension and condonation of time limits in regard to the appointment of business rescue practitioners

CIPC has decided to grant extension and condonation of time limits in regard to appointment of business rescue practitioners, as prescribed under Regulation 166 (1) of the Companies Regulations, 2011, in cases where suitable business rescue practitioners cannot be appointed in time.

Regulation 166. Extension and condonation of time limits

(1) The senior officer of a regulatory agency may generally extend any particular time limit set out in the Act or these regulations for filing any document with that agency, to the extent necessary or desirable having regard to the public demand for access to the agency’s services, the administrative capacity of the agency to meet that demand, and the interests of efficiency and equality of access.

(2) On good cause shown, the recording officer of a regulatory agency may condone late performance of an act in respect of which the Act or these regulations prescribe a time limit, other than a time limit that is binding on the regulatory agency itself.

The extension and condonation of time limits in regard to appointment of business rescue practitioners, whilst operative, has, however, not been officially published yet.

How to obtain extension for appointing a business rescue practitioner

Companies and close corporations entering voluntarily business rescue in terms of Section 129: Company resolution to begin business rescue proceedings and wishing for official permission to postpone appointment of the business rescue practitioner, must apply for the extension from CIPC when filing at CIPC.

Affected persons entering compulsory business rescue in terms of Section 131: Court order to begin business rescue proceedings and wishing for official permission to postpone appointment of the business rescue practitioner, must apply for the extension from CIPC prior to applying for a court order.

Email: businessrescue@cipc.co.za.

Call Amanda Lotheringen at 012 394 1512 (work) or 082 497 4605 (cell).

Business rescue implementation

Who are in business rescue and who are registered business rescue practitioners?  Can business rescue commence without an appointed business rescue practitioner?

The people at CIPC dealing with business rescue are highly dedicated, qualified, and extremely helpful, but the newly formed CIPC is still getting its administrative support system for business rescue in place e.g. website notices, Practice Notes, etc.

It is assumed that CIPC will sooner or later publish business rescue figures e.g. names of companies and close corporations that are in business rescue either through filing a resolution or in terms of a court order.

The news that business rescue practitioners can be licensed on an interim basis, and that extension can be obtained to appoint a business rescue practitioner, was slow to filter through to the market.

This impacted on the debate whether the decreased liquidations statistics in May and June 2011 were due to business rescue implemented on 1 May 2011.  (See Liquidations statistics).

Lack of proof of voluntarily business rescue commencement

Problems are currently experience where companies and close corporations entered voluntarily section 129: Company resolution to begin business rescue proceedings business rescue, but did not publish their Form 123.1 Notice of start of Business Rescue Proceedings, after filing at CIPC, to affected persons as required by Regulation 123: Notices to be issued by a company concerning its business rescue proceedings.

As a result, affected persons are threatening to oppose business rescue in terms of section 130: Objections to company resolution, or have already done so successfully.

Lack of proof that a business rescue practitioner with an interim license has been appointed or that extension for appointing a business rescue practitioner has been obtained

Failure to have an interim licensed business rescue practitioner registered by CIPC will lead to business rescue applications from companies or close corporations to be opposed by affected persons in terms of section 130: Objections to company resolution, or for court orders in terms of section 131: Court order to begin business rescue proceedings not to be granted.

For instance, Judge Hatting, in Standard Bank vs. Major Trucking case number 2011/23891, a voluntarily section 129 business rescue opposed through section 130, ruled on 30 June 2011 that procedurally, business rescue can only commence when CIPC has accredited professions or licensed business rescue practitioners.

He could not have known that the day before the first interim license was granted.

Business rescues in the news

Voluntarily business rescues

Pinnacle Point business rescue:

Pinnacle Point Group Business Rescue Approved. (2011, July 28). Moneyweb.

Muller, J. (2011, July 7). Pinnacle Point - More Like the Nadir -Developer Seeks Rescue in New Companies Act. Financial Mail.

Pinnacle Was After More Worker Funds. (2011, July 1). Mail & Guardian.

SACTWU in Putsch to Oust Trustees; Seeks to Recover Pinnacle Pt Monies. (2011, July 1). Moneyweb.

PNG - Pinnacle Point Group Limited - Notice of Application for Business Rescue. (2011, June 28). ABN Digital.

PNG - Pinnacle Point Group Limited - Notice of Withdrawal of Application for Bussiness Rescue. (2011, June 23). ABN Digital.

Mokopanele, T. (2011, June 6). Pinnacle First to Seek "Business Rescue." BusinessDay.

Blyvoor business rescue:

DRDGOLD Limited - DRDGOLD Suspends Financial Assistance to Blyvoor. (2011, June). ABN Digital.

Compulsory business rescues

 

References

Professional web sites

CIPRO to Establish Companies and Intellectual Property Commission. (2010, November 2). Deneys Reitz Attorneys.

LSSA to Ask CICP to Accredit Attorneys as Business Rescue Practitioners. (2011, June). Law Society of South Africa.

Van der Walt, J. (2011). Registration as a business rescue practitioner. CRS Business Rescue.

Media articles

DRDGOLD Limited - DRDGOLD Suspends Financial Assistance to Blyvoor. (2011, June). ABN Digital,

Steyn, L. (2011, May 20). Bring Out the Rescue Remedy. Mail & Guardian Online.

Weavind, T. (2011, July 9). Creditors Aim to Cash in on New Business Rescue Provisions. Business LIVE.

Weavind, T. (2011, July 9). Turnarounds: Does Business Rescue Have the Right Remedy. Times LIVE.


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