Lucinde Rhoodie joined Refilwe Motsie on Jozi FM to unpack the difference between business rescue and liquidation

Lucinde Rhoodie joined Refilwe Motsie on Jozi FM to unpack the difference between business rescue and liquidation

Podcast

Lucinde Rhoodie joined Refilwe Motsie on Jozi FM to unpack the difference between business rescue and liquidation

Podcast

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Lucinde explains that business rescue, which is governed by Chapter 6 of the Companies Act, is designed to help businesses in financial distress. This process involves appointing a business rescue practitioner with the priority of restoring the business from financial distress to profitability, which is obviously in the best interests of all stakeholders in that business. In contrast, liquidation usually leads to the termination of a company with the aim of providing the best possible return for creditors. A liquidator is appointed to wind down the business in an orderly manner by collecting debts, selling assets, and paying creditors according to their priority.

If there is a reasonable chance of restoring the business to financial health, business rescue is therefore preferable.

One of the biggest downfalls of business rescue is that businesses often delay seeking distress advice until it's too late. Management should engage their trusted advisors – financial and legal – and business rescue practitioners at the first sign of distress. Early intervention is crucial for effective assessment and rescue planning.