Business Rescue Legislation: Rehabilitating or Debilitating Business Rescue Success During Covid-19

Abstract

In South Africa (SA), business rescue was introduced in 2011 to assist financially distressed companies. However, the COVID-19 pandemic triggered an avalanche of economic uncertainties, and in 2020, SA became the fifth highest country affected by COVID-19 infections, resulting in a total shutdown of all businesses, except for essential services. The combined effect of lockdown levels and collapses in supply chains resulted in a 42% increase in companies filing for business rescue between April and October 2020. This study diagnosed the shortcomings of the current business rescue legislation, in the context of a pandemic, which could have affected the financial rehabilitation of those companies applying for business rescue. The discussion is grounded on existing business rescue literature. This study comprised of a critical review of existing literature, as a methodology to conduct the study. The study identified several shortcomings such as inadequate time frames for the business rescue process, insufficient definition of reasonable prospect and a lack of procedures for a company filing for business rescue in a pandemic that could have impacted distressed companies and compromised prospects of resuscitation. The study recommends that amendments be made to current legislation as a panacea for distressed companies due to COVID-19.