How To Write A Rescue Plan

Transcription

1 (2014) 2 NIBLeJ 6 Corporate Rescue: The South African Business Plan Examined Elizabeth SNYMAN-VAN DEVENTER* and Lézelle JACOBS** Introduction 1 With the promulgation of the Companies Act, 71 of 2008 a new era of corporate rescue was entered into by failing South African businesses. 1 The provisions pertaining to business rescue are contained within chapter 6 of the Act and refers to proceedings to facilitate the rehabilitation of a company that is financially distressed by providing for: the temporary supervision of the company, and of the management of its affairs, business and property; a temporary moratorium on the rights of claimants against the company or in respect of property in its possession; and the development and implementation, if approved, of a plan to rescue the company. 2 2 The drafting, acceptance and implementation of a business rescue plan are among the most important aspects of a modern rescue model. 3 One of the business rescue practitioner s duties is the drafting and implementation of the business rescue plan, which the practitioner must draft once he has completed his investigation into the affairs of the company and consulted the affected persons as well as the management of the company. 4 * Elizabeth Snyman-van Deventer is a Professor in the Department of Mercantile Law at the University of the Free State, Bloemfontein, South Africa. ** Lézelle Jacobs is a Lecturer in the Department of Mercantile Law at the University of the Free State, Bloemfontein, South Africa. 1 The Companies Act, 71 of Ibid., section 128(1)(b)(i)-(iii). 3 See P. Kloppers, Judicial Management - A Corporate Rescue Mechanism in Need of Reform? (1999) 10 Stellenbosch Law Review 417, at 427: The formulation of a reasonably detailed plan of action to lead the company from its financial woes to again being a successful concern is an important part of the recovery of the company. See also D. Burdette, Some Initial Thoughts on the Development of Modern and Effective Business Rescue Model for South Africa (Part 2) (2004) 16 South African Mercantile Law Journal 409, at Sections 141 and 150(1), Companies Act, 71 of 2008.

2 104 Nottingham Insolvency and Business Law e-journal 3 The drafting and implementation of a business rescue plan is new to the South African corporate rescue model. Previously, judicial managers were not required to draft a plan for the rehabilitation of the company, and it could be said that they only tried to manage it back to health. It is therefore relevant and necessary to examine the business rescue plan and its provisions. 4 This will be done by firstly exploring the international standards set in the United Nations Commission on International Trade Law (UNCITRAL) Legislative Guide to Insolvency Law. 5 The new provisions in the South African Companies Act will then be compared to the international standards in order to ascertain whether or not the South African provisions are on par with the international scenario. An International Standard UNCITRAL 5 A central element of the business rescue proceedings is the restructuring plan, of which various aspects are usually dealt with in insolvency laws. 6 These aspects may include provisions on the person responsible for drafting the plan, when the plan should be drafted, what it should contain, the way in which it should be proposed to the creditors, whether the court should confirm the plan and, of course, what the effect of the plan will be and how it will be implemented. 7 6 Different types of proceedings call for different restructuring plans. 8 However, the important restructuring plan for present purposes is the type proposed at the start of the proceedings, stipulating how the debtor and the business should be dealt with during business rescue, much similar to a business plan. 9 7 As the objective of the rescue process is interpreted in so many different ways, it follows naturally that the nature of the plan as well as the form it eventually takes will differ from one case to another. 10 In addition, there are different views on the objectives of the plan, as well as the way in which these objectives may be best achieved. Some role players prefer the continuation of the debtor s business, while others would opt for an equity stake in the business. For this reason, a variety of options are available in respect of the nature and form of the plan The UNCITRAL guide does however warn against laws with prescriptive provisions, as it could lead to a restrictive interpretation: 5 UNCITRAL, Legislative Guide to Insolvency Law (2005). 6 Ibid., at 209 (Item 1). Burdette, above note 3: The design, acceptance and implementation of a business rescue plan is surely one of the most important aspects of a modern business rescue model. 7 UNCITRAL, Legislative Guide to Insolvency Law (2005). 8 Ibid., at 209 (Item 2). 9 Ibid., at 209 (Item 1). 10 Ibid., at (Item 3). 11 Idem.

3 Snyman-van Deventer and Jacobs: Corporate Rescue 105 It is desirable that the law not restrict reorganization plans to those designed only to fully rehabilitate the debtor; prohibit debt from being written off; restrict the amount that must eventually be paid to creditors by specifying a minimum percentage; or prohibit exchange of debt for equity. A non-intrusive approach that does not prescribe such limitations is likely to provide sufficient flexibility to allow the most suitable of a range of possibilities to be chosen for a particular debtor In terms of the submission of the plan, two vitally important aspects need to be considered: 13 first, the stage during the proceedings at which the plan should be proposed, and, secondly, the person(s) who would be authorised to propose the plan The time of submission will depend on the objectives of the process, or the way in which business rescue commences. 15 Some jurisdictions provide for the submission of a rescue plan along with the application for the commencement of the procedure. 16 The downside to this approach is that it causes a delay for the debtor to apply for the process to be instituted and, therefore, to obtain speedy relief. It is furthermore important to keep in mind that where the creditors and other role players have not been afforded the opportunity to gain insight in the plan, they could still reject the plan and its intended effect. Other laws, in turn, provide for negotiations with role players, followed by the submission of the business rescue plan, but only once the process has already commenced. This is a more flexible option, as it provides the opportunity for consultation and negotiations in order to develop an appropriate plan, while the debtor remains protected by the moratorium. Again, one should be mindful of, and guard against, possible misuse of the process With regard to the persons authorised to propose the plan, the UNCITRAL guide stipulates that the participants in the process may have various powers and functions in respect of the rescue plan, depending on the way in which the insolvency law has been designed, as well as the respective responsibilities imposed on the rescue practitioner, the debtor and the creditors: 18 In determining which party should be permitted to propose, or which parties are capable of proposing, a plan, a balance may be desirable between the freedom accorded to the different parties to propose a plan (e.g. should all parties be able to propose a plan, should they be able to do so at the same time or should proposal by different parties be sequential and dependent upon the acceptability of a plan proposed) and the restraints necessarily attached to the process in terms of approval (voting) requirements (e.g. should all creditors play a role 12 Ibid., at (Item 3). 13 Ibid., at 210 (Item 6). 14 Idem. 15 Ibid., at 210 (Item 7). 16 Ibid., at 211 (Item 7). 17 Idem. 18 Ibid., at 211 (Item 8).

4 106 Nottingham Insolvency and Business Law e-journal in formulating a plan they have to approve), time limits for negotiation and proposal, possible amendment of the plan and other procedural considerations The success of the plan largely depends on what is actually achievable, and on whether, based on the available facts and reasonable assumptions, there is a probability that the plan and the debtor could succeed. 20 There are two important aspects relating to this, namely the content of the plan, and the way in which the proposals in the plan are presented and explained to the creditors in order to elicit their cooperation Certain jurisdictions provide for stipulations on the content of the plan: Some laws address the content by referring to general criteria, such as provisions requiring that the plan should provide information in connection with the debtor s financial status to all parties involved. 22 In other jurisdictions, more specific information with regard to the debtor s financial position is required in the plan, such as the debtor s balance sheets, cash flow statements as well as information on the cause of the debtor s financial distress The proposal contained in the plan will depend on the objective of the plan and the circumstances of the particular debtor. It may involve information on, inter alia, the various claim categories, whether or not incomplete contracts will be continued, the handling of rental agreements, the handling of the debtor s assets, the sale or indication on the handling of encumbered assets, the disclosure and acceptance procedures, etc. 24 However, it may be preferable for the law to identify only the minimum prescribed content of the plan, focusing on the main objectives of the plan and the process of implementation, rather than a broad range of detailed prescripts The plan will have to be accompanied by certain other, or further, information. This is required for the creditors and other stakeholder parties who may have to vote on the plan, to satisfy themselves that the proposed plan is indeed feasible and has not been based on false assumptions. 26 It will also have to be established 19 Idem. 20 Ibid., at 214 (Item 17): The outcome of the plan rests on what is feasible, that is, whether, on the basis of known facts and circumstances and reasonable assumptions, the plan and the debtor are more likely than not to succeed. 21 Idem. 22 Ibid., at 215 (Item 18): Some laws address the content of the plan by reference to general criteria, such as requirements that the reorganization plan should adequately and clearly disclose to all parties information regarding both the financial condition of the debtor and the transformation of legal rights that is being proposed in the plan, or by reference to minimal requirements, such as that the plan must make provision for payment of certain preferred claims. It should be noted that a plan need not modify or otherwise affect the rights of every class of creditor. 23 Ibid., at 215 (Item 19). 24 Idem. 25 Ibid., at 215 (Item 20). 26 Ibid., at 216 (Item 23).

5 Snyman-van Deventer and Jacobs: Corporate Rescue 107 whether the plan will not plunge the debtor into further debt. For the latter reason, the guide proposes that the plan be accompanied by a disclosure statement providing detailed information in order to afford the parties concerned the opportunity to properly assess the plan. To ensure that such statement is credible and objective, it may be compiled by a qualified professional person The law should also stipulate the procedure for the approval of the plan. In some jurisdictions, laws provide that a special meeting of creditors should be called in order to enable them to vote on the plan. 28 In addition, the law will usually provide for the possible use of a proxy during voting The guide further proposes that the law should provide for a rescue plan to be referred back in a case where creditors have the right to negotiate on the provisions contained in the plan. 30 This is once again aimed at affording the creditors the opportunity to participate in the rescue process. Such a provision should however limit the number of times that the plan may be referred back, in order to prevent misuse. 31 Moreover, the law should stipulate the procedure in a case where a compromise cannot be reached. 32 In some jurisdictions, this is interpreted as an indication that the creditors are not in favour of the rescue, and that the proceedings may be converted into liquidation. This approach may ensure the necessary motivation for the creditor to propose an acceptable plan. 33 In other jurisdictions, however, laws provide that the rescue process should be terminated in such a case, which still leaves the debtor in financial distress and simply causes the inevitable liquidation proceedings to be postponed With regard to the confirmation of the plan by the court, not all jurisdictions require a plan that has been approved by the prescribed majority of creditors, to be approved by the court as well. 35 In other jurisdictions, the plan will not be binding until it has been so confirmed. 36 However, where the law provides for confirmation, it is possible that other role players may still challenge the approval of the plan, and the law should therefore also clearly identify the possible parties who may raise 27 Idem. 28 Ibid., at (Item 30). 29 Idem. 30 Ibid., at 225 (Item 52): Whichever voting mechanism is chosen, it is desirable that the insolvency law be sufficiently flexible to allow a plan submitted for approval to be negotiated by creditors and other parties in interest in the course of the voting procedure with a view to achieving wide support. Where such negotiation is not possible and voting is restricted to the plan as proposed, the chances of achieving approval of that plan may be reduced. 31 Ibid., at 219 (Item 30). 32 Ibid., at 225 (Item 53). 33 Idem: This approach may encourage debtors to propose an acceptable plan, subject to safeguards to prevent abuse in cases where liquidation is not in the interests of all creditors. 34 Idem. 35 Ibid., at 226 (Item 56). 36 Idem.

6 108 Nottingham Insolvency and Business Law e-journal such a challenge. 37 According to the UNCITRAL guide, certain insolvency laws stipulate the grounds for the aforesaid challenges. 38 Examples of these grounds include where approval for the plan has been fraudulently obtained, 39 where there were irregularities in respect of the voting procedure, 40 where the proposals contained in the plan have been inserted for a wrongful purpose, or where the plan is in conflict with the law, or even unfeasible. 41 The South African Provisions: Companies Act, 71 of The business rescue plan is one of the greatest improvements in respect of the South African rescue model. By having to propose, accept and implement a business rescue plan, the restructuring of the debtor could occur much sooner, with the added benefit that certainty with regard to the outcome of the rescue is created for all parties concerned The aim of the rescue plan is to restructure the company s affairs, business, property, debt and other liabilities and equities in a manner that maximises the likelihood of two possible outcomes: first, the likelihood of the company continuing in existence on a solvent basis or, if it is not possible for the company to do so, the likelihood of a better return for the creditors or shareholders than would result from the immediate liquidation of the company Only after the formal commencement of business rescue proceedings will a business rescue plan be drafted by a business rescue practitioner in consultation with affected parties. 22 In the Petzetakis case, it was held that if an achievable draft rescue plan which has substantial support is provided at the time of the application for the rescue order that it will improve the prospects of the application as it will enable the court 37 Ibid., at 227 (Item 57). 38 Ibid., at 226 (Item 58). 39 Ibid., at 227 (Item 58): e.g. false or misleading information was given to creditors and other parties in interest or material information was withheld with respect to the reorganization plan or the financial affairs of the debtor. 40 Idem: e.g. related persons participated where this is not permitted under the insolvency law or the resolution approving the plan was not consistent with the interests of creditors generally. 41 Idem: e.g. encumbered assets are required for successful implementation of the plan, but secured creditors are not bound by the plan and no agreement has been reached with relevant secured creditors concerning enforcement of their security interests. 42 Burdette, above note 3: By introducing the proposal, acceptance and implementation of a business rescue plan, the reorganisation of a debtor can be brought to finality a lot sooner, with the added advantage that it creates certainty for all the parties involved as to what the outcome of the business rescue will be once a plan has been accepted and implemented. 43 Section 128(1)(b)(iii), Companies Act, 71 of 2008.

7 Snyman-van Deventer and Jacobs: Corporate Rescue 109 to ascertain whether a reasonable prospect exists for rescuing the company. 44 This statement is, however not a practically sound one as it will cause unnecessary delays for the process and the creditors as well as certain cost implications for the applicant. The argument is also not in line with the UNCITRAL guidelines as discussed above. 45 In the Supreme Court of Appeal case of Oakdene Square Properties, Judge Brand made the following confirming comments: All the applicant has to show is that a plan to do so is capable of being developed and implemented, regardless of whether or not it may fail the applicant is not required to set out a detailed plan. That can be left to the business rescue practitioner after proper investigation in terms of s It is therefore clear that it not necessary to include a business rescue plan in the application for the commencement of rescue proceedings. Content of the Plan 24 The Companies Act (hereinafter the Act) provides that the business rescue plan must contain all information that the affected persons may reasonably require to come to a decision on whether they want to vote in favour of the plan or reject it. 47 The content of the plan is divided into three parts, namely Part A containing the background, 48 Part B containing proposals 49 and, finally, Part C containing the assumptions and conditions in respect of the plan The Act stipulates clear guidelines on precisely what should be dealt with under each of these sections, and obviously serves as an aid for the business rescue practitioner entrusted with the task of drafting the plan. However, the provisions contain too many unnecessary prescripts, which will merely serve to drive up the cost of the proceedings AG Petzetakis International Holdings Ltd v Petzetakis Africa (Pty) Ltd 2012 (5) SA 515 (GSJ) The downside to this approach is that it causes a delay for the debtor to apply for the process to be instituted and, therefore, to obtain speedy relief. It is furthermore important to keep in mind that where the creditors and other role players have not been afforded the opportunity to gain insight in the plan, they could still reject the plan and its intended effect. 46 Oakdene Square Properties (Pty) Ltd v Farm Bothasfontein (Kyalami) (Pty) Ltd 2013 ZASCA Section 150(2), Companies Act, 71 of Ibid., section 150(2)(a). 49 Ibid., section 150(2)(b). 50 Ibid., section 150(2)(c). 51 See A. Loubser, The Business Rescue Proceedings in the Companies Act of 2008: Concerns and Questions (Part 2) (2010) 4 Tydskrif vir die Suid-Afrikaanse Reg 589, at 692: the act goes on to prescribe a long list of specific and often unnecessary minimum information that must be included and which will undoubtedly add to the costs of the procedure.

8 110 Nottingham Insolvency and Business Law e-journal Part A Background 26 In terms of the guidelines, Part A, which deals with the background, should at least contain a complete list of the material assets held by the company, as well as an indication of which of the company s assets are held as security by creditors. 52 In addition, the section should contain a full list of all the company s creditors as at the commencement of the proceedings, along with an indication of which creditors hold secured claims and which hold preferential and concurrent claims in accordance with the relevant insolvency law rules. 53 The list of creditors should also indicate which creditors have already proven their claims. 54 The next important aspect covered by Part A is the probable dividend that the creditors, in their respective categories, stand to receive should the company be liquidated. 55 As several unpredictable factors may influence the dividend, an expert such as an accountant or auditor will have to be approached in order to do the necessary calculations, which will again have considerable cost implications for the company. 56 An argument could be made that a suitably qualified business rescue practitioner should have the ability to do the calculations himself. Unfortunately most practitioners, even though they might be experienced businessmen, will not be able to do these complicated calculations and therefore experts will still have to be consulted. 27 Part A should also include a complete list of the holders of the company s issued securities, 57 a copy of the written agreement between the company and the practitioner in respect of the latter s remuneration, 58 as well as a declaration by the practitioner on whether the business rescue plan includes a proposal made informally by one of the company s creditors. 59 The latter provision is of course unnecessary and superfluous, as the practitioner is compelled by the Act to consult the creditors Section 150(2)(a)(i), Companies Act, 71 of The security held by the creditors should have already existed at the commencement of the rescue process. 53 Ibid., section 150(2)(a)(ii). 54 Idem. 55 Ibid., section 150(2)(a)(iii). 56 Loubser, above note 51: Since there may be a number of factors that cannot be predicted with any degree of accuracy and that may influence these figures, the calculation of this dividend (and other projections and estimates required by the act) will in all probability require the services of an expert such as an accountant auditor, thereby adding to the costs of what is increasingly developing into a very expensive procedure. 57 Section 150(2)(a)(iv), Companies Act, 71 of See also Loubser, above note 51. According to Loubser, such a list will probably contain thousands of names, and will cost a substantial amount of money to compile, even though it is not clear what purpose it will serve. 58 Section 150(2)(a)(v), Companies Act, 71 of Ibid., section 150(2)(a)(vi). 60 Loubser, above note 51.

9 Part B Proposals Snyman-van Deventer and Jacobs: Corporate Rescue Part B, which contains the proposals, should at least indicate the nature and duration of any moratorium for which the business rescue plan provides. 61 This section should also mention the extent to which the company is exempt from the payment of its debts, and the proposed extent to which any debt should be converted into equity in the company, or another company. 62 Also included in this section should be an explanation of the ongoing role of the company, and the handling of any existing agreements The next important aspect for inclusion in Part B is a breakdown of the company assets available to pay the creditors claims, as provided for in the business rescue plan. 64 The order of preference in which the proceeds on the assets will be distributed among creditors if the plan is accepted, must also be mentioned here. 65 Possibly one of the most vital aspects to be contained in this section is an explanation of the benefits attached to the acceptance of the plan, as opposed to the benefits if the creditors were to liquidate the company. 66 The last aspect to be addressed in Part B is a description of the effect that a rescue plan will have on the holders of each category of the company s securities. 67 Part C Assumptions and Conditions 30 The final part of the business rescue plan, Part C, deals with assumptions and conditions in respect of the plan. The first aspect to be contained in Part C is a statement of conditions that should be met, if any, before the business rescue plan can take effect or be fully implemented. 68 The next point is the likely effect, if any, that the rescue plan will have on the number of employees of the company as well as their terms and conditions of service. 69 Part C should also list the circumstances in which the business rescue will come to an end. 70 A proposed balance sheet for the company as well as a projected statement of income and expenditure for the next three years, on the assumption that the plan is accepted, should also be included in this section. 71 This requirement again involves a large degree of speculation and projection as well as significant cost implications Section 150(2)(b)(i), Companies Act, 71 of Ibid., section 150(2)(b)(ii). 63 Ibid., section 150(2)(b)(iii). 64 Ibid., section 150(2)(b)(iv). 65 Ibid., section 150(2)(b)(v). 66 Ibid., section 150(2)(b)(vi). 67 Ibid., section 150(2)(b)(vii). 68 Ibid., section 150(2)(c)(i)(aa)-(bb). 69 Ibid., section 150(2)(c)(ii). 70 Ibid., section 150(2)(c)(iii). 71 Ibid., section 150(2)(c)(iv)(aa)-(bb). 72 Loubser, above note 51, at 693.

10 112 Nottingham Insolvency and Business Law e-journal The Business Rescue Plan: General Comments 31 A business rescue plan may stipulate that, if it is implemented in accordance with its terms and conditions, a creditor who has accepted the full or partial payment of debt owed to him will lose the right to enforce that debt or part thereof The business rescue plan must be published within 25 business days following the appointment of the rescue practitioner. 74 However, the Act itself provides no clear prescripts regarding the publication of the rescue plan, and therefore, one must refer to the regulations issued in terms of the Act. In terms of regulation 125(3), the business rescue practitioner must publish the plan by informing each affected person that the plan is available for inspection, 75 as well as by displaying a notice to that effect at the registered head office of the company or on the company s website Even though the Act requires the business rescue plan to contain comprehensive information, it seems to fail to address certain other aspects that may be important to creditors, such as the reasons for the company s financial distress and how the practitioner plans to deal with them. 77 This argument was confirmed by Judge Eloff in the Southern Palace case, where he stated the following: While every case must be considered on its own merits, it is difficult to conceive of a rescue plan in a given case that will have a reasonable prospect of the company concerned continuing on a solvent basis, unless it addresses the cause of the demise or failure of the company s business, and offers a remedy therefor that has the reasonable prospect of being sustainable The Act should provide for flexibility in the contents of the plan. It should be flexible enough to provide for certain unique problems faced by the business rescue practitioner. This might include provisions pertaining to dispute resolution in order to deal with conflicts amongst creditors and/or shareholders and the practitioner. The business rescue plan should therefore make provision for dispute resolution mechanisms whereby the validity of claims may be challenged by affected parties, including the business rescue practitioner Section 154(1), Companies Act, 71 of Ibid., section 150(5). This period may however be extended by the court or a majority of creditors. 75 Regulation 125(3)(a), Companies Regulations pursuant to the Companies Act 71/ Ibid., regulation 125(3)(b)(i)-(ii). 77 Loubser, above note 51, at Southern Palace Investments 265 (Pty) Ltd v Midnight Storm Investments 386 Ltd 2012 (2) SA 423 (WCC), at See J. Patel, Amendments to Approved Business Rescue Plans, article at Turnaround Management Association South Africa, copy available at: < amendments-to-approved-business-rescue-plans.html> (last accessed 15 June 2014).

11 Snyman-van Deventer and Jacobs: Corporate Rescue Aside from resolving disputes of creditors pertaining to claims, the practitioner must also be empowered to take action against a defaulting party. The plan therefore must make provision for the necessary dispute resolution mechanisms which would regulate such action. In this regard and as a starting point the practitioner could have regard to the standard dispute resolution mechanisms and provisions that are commonly put in place in commercial contracts. 80 Meeting to Consider the Plan and the Future of the Company 36 Within ten business days following the publication of the business rescue plan, the rescue practitioner must call a meeting in order to consider the plan as well as the future of the company. 81 The meeting must be attended by the creditors of the company and any other holders of voting interests. 82 At this meeting, the rescue practitioner must present the proposed rescue plan to the creditors and shareholders to afford them the opportunity to consider it. 83 The practitioner must also use this opportunity to inform the meeting of whether he/she still believes that there is a reasonable prospect of the company being rescued The creditors and shareholders may then discuss and raise arguments about the plan, as well as cast any vote on a motion regarding the amendment of the plan or the adjournment of the meeting to afford the practitioner time to revise the plan based on their recommendations. 85 The proposed plan may also be provisionally approved through a vote during the meeting, subject to certain amendments, unless the meeting has already been adjourned If the meeting voted on the plan, it will be regarded as having been provisionally approved if the plan received support from the holders of more than 75% of the creditors voting interests that were voted, 87 and if the votes in support of the proposed plan included at least 50% of the independent creditors voting interests, if any, that were voted. 88 If the suggested plan is not provisionally approved, it is regarded has having been rejected, and may be considered further only in terms of section If the suggested plan does not alter the rights of any class of company securities, the provisional approval of the plan will also constitute the final adoption, subject 80 Idem. 81 Section 151(1), Companies Act, 71 of Idem. 83 Ibid., section 152(1)(a). 84 Ibid., section 152(1)(b). 85 Ibid., section 152(1)(c), (d)(i)-(ii). 86 Ibid., section 152(1)(e). 87 Ibid., section 152(2)(a). 88 Ibid., section 152(2)(b). 89 Ibid., section 152(3)(a).

12 114 Nottingham Insolvency and Business Law e-journal to compliance with certain conditions on which the plan depends. 90 However, if the plan does alter the rights of any security holders, the practitioner must immediately call a meeting for the holders of that class of securities, for them to consider the adoption of the plan. 91 Should the majority of security holders support the plan, it would constitute the final adoption of the plan. 92 However, should the plan be rejected, section 153 applies A business rescue plan approved in the abovementioned ways is binding on the company, each of the creditors of the company, and each holder of company securities, 94 whether or not that person was present at the meeting 95 or voted in favour of the plan. 96 The practitioner is responsible to ensure that the company complies with any and all conditions in respect of the plan, 97 and to see to it that the plan is implemented as adopted. 98 As soon as the business rescue practitioner has substantially implemented the plan, he/she must submit a notice of substantial implementation to the Companies and Intellectual Property Commission. 99 Conclusion and Recommendations 41 The business rescue plan represents one of the major improvements in respect of the South African rescue model. As already mentioned, in the course of the judicial management process, the judicial manager used to have to trade a financially distressed company into solvency, until all creditors have been paid and the business has become viable again. 100 By proposing, adopting and implementing a business rescue plan, the restructuring of the debtor may now be carried out much quicker, with the added benefit that there is certainty in respect of the outcome of the rescue process for all parties concerned Ibid., section 152(3)(b). 91 Ibid., section 152(3)(c)(i). 92 Ibid., section 152(3)(c)(ii)(aa). 93 Ibid., section 152(3)(c)(ii)(bb). 94 Ibid., section 152(4). 95 Ibid., section 152(4)(a). 96 Ibid., section 152(4)(b). 97 Ibid., section 152(5)(a). 98 Ibid., section 152(5)(b). 99 Ibid., section 152(8). 100 Burdette, above note 3: One of the drawbacks of judicial management is that the judicial manager is required to trade the ailing business out of trouble until all its creditors have been paid, and the business is once again a viable, solvent entity. See also Kloppers, above note 3: The formulation of a reasonably detailed plan of action to lead the company from its financial woes to again being a successful concern is an important part of the recovery of the company. However it is not an express feature of judicial management prescribed by the Companies Act in South Africa. 101 Burdette, above note 3: By introducing the proposal, acceptance and implementation of a business rescue plan, the reorganisation of a debtor can be brought to finality a lot sooner, with the added advantage that it creates certainty for all the parties involved as to what the outcome of the business rescue will be once a plan has been accepted and implemented.

13 Snyman-van Deventer and Jacobs: Corporate Rescue However, even though the requirement of a rescue plan represents a major improvement, certain difficulties with regard to its content have been identified. As the Act contains detailed prescripts about each item to be included in the plan, the plan itself runs the risk of being an obstacle in rescuing the company. The UNCITRAL guide proposes that the legislation should identify only the minimum prescribed content of the plan, primarily focusing on the objectives of the plan as well as their implementation, while the rest of the content should be more flexible and, thus, adjustable by the practitioner as required by a particular case. 43 The proposed recommendations with regard to the plan would therefore entail the following: the Act should stipulate only the bare minimum information that will be required to put into the business rescue plan. These prescripts should mostly focus on the objectives of the plan and how they are proposed to be achieved. No generic plans should exist. A plan specific to the debtor s needs ought to be drafted, taking into account all the circumstances relating to its business for example the industry or sector in which it operates as well as the company s own unique set of problems. The reasons for the company s financial distress should be included in the plan. The required contents of the plan should be flexible enough to provide for certain unique problems faced by the practitioner, such as provisions pertaining to dispute resolution. Lastly it must be borne in mind that although the plan should be concise the creditors need to be provided with sufficient information in order to make decisions on the plan.