Saving business rescue
With the onset of globalisation and markets being exposed to the effects of global recessions and economic downturns, the fundamental principles on which business operates have changed substantially. Some businesses have thrived in this new context, while others have struggled to remain competitive, as evidenced by the increasing trend of corporate failures and the considerable increase in liquidations. As a result the concept of corporate renewal and business rescue has become an integral element of the strategy of organisations, particularly for those who are financially distressed.
Recently there has been a lot of press with regard to business rescue and its effectiveness in terms of meeting its intended purpose, ie to maximise the likelihood of a financially distressed company continuing in existence on a solvent basis. Business rescue was instituted with the hope that the business will emerge from the rescue in a position to satisfy the claims of creditors more effectively than if the business were to liquidate immediately. investments sector (ie financial intermediation) and a further 28% are from the wholesale and retail services sector. An interesting question to ask is what the reasons are for the low success rate of business rescue. One of the critical success factors for business rescue is the ability of the business rescue practitioner to secure turnaround finance (referred to as post-commencement finance or PCF), in order to restore the company’s financial health.