Business rescue is defined as a proceeding to facilitate the rehabilitation of a company which is financially distressed by providing for:
- the temporary supervision of the company, and the management of its affairs, business and property;
- a temporary moratorium on the rights of claimants against the company; and
- the development and implementation, of a plan to rescue the company by restricting its affairs, business, property, liabilities and equity in a manner that maximizes the likelihood of the company continuing in existence.
The New Companies Act stipulates various effects that business rescue proceedings would have on directors.
In Summary:
- The Act requires that each director continues to exercise the function of a director, subject to the reasonable authority of the practitioner.
- The director remains bound by the regulations concerning personal financial interests.
- During the company’s business rescue proceedings, each director of the company must attend to the requests of the practitioner at all times, and provide information as required. Should the board, or one or more directors of the company, purport to take any action on behalf of the company that requires approval of the practitioner, that action is void unless approved by the practitioner.
During the business rescue proceedings, the practitioner may apply to court for an order removing a director from office on the grounds that the director has failed to comply with a requirement of Chapter 6 of the new Companies Act, alternatively, has by act or omissions impeded the practitioner to perform his powers and functions.
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