Business rescue measures, brought into effect by the Com-panies Act (of 2008) in May, are not being effectively implemented because of a cumbersome business rescue practitioner licensing process, says Werksmans Attorneys director Eric Levenstein.

Although the Companies and Intellectual Property Commission has provided some indication as to how practitioners will be licensed in terms of the new Act, it has not yet published any definitive guidelines as to how practitioners can become licensed to take up business rescue appointments, he explains.

Under the Act, business rescue practitioners are appointed to supervise insolvent companies, or those that find themselves in financial distress, as an alter- native to liquidation.

“It appears that, once a practitioner has been appointed by the company (by way of resolution) or by the Court, he or she will have to submit a full and comprehensive CV to the commission to apply for an ad-hoc licence.

“This licence would only be applicable for the particular company in which that practitioner was nominated. There are also various levels for which practitioners will be able to apply to be licensed, such as senior (at least ten years’ expe- rience), experienced (5 years) and junior (less than 5 years),” says Levenstein.

The commission said it would attempt to process licence appli- cations urgently, which is an imperative for successful business rescue to take place. Only once the licence is granted will, the practitioner be entitled to supervise business rescue proceedings. He or she will be licensed on an interim basis and for a limited period.

However, the commission will grant extensions of licences depending on the time it takes to bring the business rescue process to an end.

“It is important that the com-mission deals with the granting of licences vigilantly because the challenges faced by practitioners will be onerous. They will have to deal with the directors of distressed companies as well as employees, trade unions, shareholders and creditors. Each one of these stakeholder groups will have its own ‘agenda’ in the proceedings, which will not necessarily align with one another. However, if successful, business rescue proceedings will benefit all parties concerned, explains Levenstein.

Meanwhile, the Companies Act is good news for the banking fraternity because certain debtor companies may now have a viable alternative to liquidation. The new business rescue process increases the ability of creditors to recoup what otherwise could have been losses in liquidation, he adds.

“The new legislation tasks practitioners with the supervision of companies trading in a position where creditors are not being paid and/or where the companies’ balance sheets reflect an insolvent position. Such appointments are lucrative as practitioners can earn up to R25 000 a day in large companies.

“Further, practitioners can agree on additional remuneration, calculated on a contingency fee basis, relating to the successful adoption of the business rescue plan,” he concludes.

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