In 1926 South Africa became one of the first countries to introduce a system of corporate rescue also known as Judicial Management into its legal system of the companies Act of 1926.
This system was developed in order to afford companies some breathing space that is experiencing some sort of temporary financial setback with the view that it could survive with reasonable prospect, with the institution of the Business Rescue concept as it was later retained in 1973, however, the Companies Act of 2008 defines business rescue in section 128 (1) (b) as follows:
- ‘business rescue’ means proceedings to facilitate the rehabilitation of a company that is financially distressed by providing for-
- the temporary supervision of the company, and of the management of it’s affairs, business and property;
- a temporary moratorium on the rights of claims against the company or in respect of property in its possession; and
- the development and implementation, if approved of a plan to rescue the company by restructuring its affairs, business, property, debt and other liabilities, and equity in a manner that maximises the likelihood of the company continuing it’s existence on a solvent basis or, iif it’s not possible for the company to so continue in existence, results in a better return for the company’s creditors or shareholders than would result from the immediate liquidation of the company;
The above has been defined as such in order to provide a company with the optimum opportunity to survive and the opportunity to return to its former financial health.