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Surge in struggling SA businesses as liquidations rise by 34.6%

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Surge in struggling SA businesses as liquidations rise by 34.6%

Vincent Manko, Director in the Dispute Resolution practice, joined Jeremy Maggs on Moneyweb to discuss the importance of business rescue amid a significant surge in liquidations.

25 Apr 2024 06:17 Minutes Radio interview
Surge in struggling SA businesses as liquidations rise by 34.6%

Surge in struggling SA businesses as liquidations rise by 34.6%

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Surge in struggling SA businesses as liquidations rise by 34.6%

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He explained that companies typically enter liquidation due to an inability to settle debts, exacerbated by current economic challenges such as sluggish trading. Vincent highlighted a 34.6% increase in liquidation cases in January 2024 compared to the previous year.

Vincent emphasised the presence of legal frameworks in South Africa, notably the 2008 Companies Act, which introduced business rescue provisions effective from 2011. Business rescue aims to foster innovation, attract investment, and offer a structured approach to company recovery.

He noted that businesses facing financial distress might choose between liquidation and business rescue based on their solvency status. While insolvent companies should opt for liquidation, those experiencing financial strain without insolvency might benefit from business rescue.

However, Vincent cautioned about the risks involved, such as the potential for businesses to delay seeking rescue until they become insolvent. Additionally, a lack of cooperation among stakeholders, including employees, creditors, and unions, could hinder the success of business rescue efforts.

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