Introduced in 2011, business rescue has become a commonplace term in SA’s corporate landscape. But as familiar as it might be, perception of its success is poor and, increasingly, business rescue proceedings appear to be inordinately long and harrowing.

A provision of the Companies Act, business rescue is intended help rehabilitate financially distressed entities. Once in business rescue, a temporary supervisor, a business rescue practitioner, is appointed to take over the management of the company, which, under this legal provision, enjoys a temporary stay of execution from creditors’ claims.

Meanwhile, the business rescue practitioner is responsible for compiling a plan which sets out the best way to rescue the business. Once the majority of creditors vote in favour of the plan, it can be executed.

It’s an opportunity for a business to step back, rethink, restructure and hopefully secure a better return for the creditors and especially employees.

As at March 2018, according to the Companies and Intellectual Properties Commission’s report on the status of business rescue proceedings in SA, 2,867 business rescue proceedings have been initiated since business rescue came into effect in 2011. Of these 1,691 had ended, while 1,176 are considered active.

In law, the process is designed to take three months. Business rescue experts say that in practice six months is more realistic. But in many instances they drag on much longer.

Top of mind are those businesses linked to the Gupta family which were placed in business rescue in February 2018 when they became unable to transact. Because it was only the lack of banking facilities which caused their distress in the first place, the rescue practitioners believed the companies could be saved simply by selling the assets to new owners who have not fallen out of favour with financial institutions.

Yet, of the nine entities in question, not one has been successfully rescued as yet as a barrage of legal challenges have hobbled progress. In fact, the issues appear to have been exacerbated. At the Optimum Coal Mine, for example, employees have not been paid since last November and operations have been idle since December. All the while the assets fall into disrepair and surrounding communities grow increasingly desperate.

Basil Read, another SA construction company to crumble under tough economic times, was placed under business rescue in June 2018. Yet proceedings have faced delays as funding falls through and asset sales take longer than anticipated. As of January, just 17 staff were left at the Basil Read headquarters.

Vantage Goldfields SA was placed under business rescue three years ago, just months after a tragic accident at its Lily mine near Barberton where three miners were trapped underground after a ground collapse. The business remains in rescue and, with a dispute over funding with the prospective new owner tied up in the courts, the rescue practitioners are considering liquidation.

The drawn-out nature of business rescue would appear to be increasingly normal.

In 2011 when business rescue was introduced, 382 proceedings were started and 320 ended. Fast forward to 2018, and 363 proceedings were started but just 82 ended — never mind the backlog from years past.

But it’s possible that business rescue has had a positive effect on liquidations, as implied by the numbers. According to Statistics SA, there were 3,992 liquidations in 2010, the year before business rescue was introduced. In general, the numbers have been decreasing  in subsequent years and in 2018, there were 1,845 liquidations.

So while the success rate for business rescue in SA is estimated at a mere 10%, it’s still worth a crack if you consider the only alternative is your garden variety liquidation.