EARLY ENGAGEMENT AROUND FUNDING
The empirical findings of the research confirmed that the current level of PCF in SA is non-existent. Some of the reasons for this include many of unintended consequences of the newness of the Act mentioned previously, business rescue processes being left too late, the poor financial state of the business that eventually files for rescue and the significant impact on the outcome by some of the key players (eg the financiers and business rescue practitioners).
Therefore one of the key ways for businesses to avoid this conundrum is to prepare themselves early on by engaging early with their creditors and lenders when they see the writing on the wall. The earlier a business considers its options on the road to business rescue, the more financing avenues are available to it. The success of a business rescue is linked to the ability of raising PCF successfully. However the research currently shows that there is a concerningly low level of PCF. It is interesting to note the number of concerns mentioned regarding the uncertainty still surrounding the interpretation of the Act and the need for additional case law or precedents to provide players in the industry with the confidence to get involved.
The assumption that business rescue itself, through the defined processes available, will help to secure PCF, is misleading. In reality the only potential sources of funding will come from traditional and existing lenders/creditors, who may already be too overexposed to support the business any further. Therefore, if funding is crucial to the success of business rescue, it is critical that management ensure that it secures PCF way before, and as part of their decision to file for business rescue.
Wanya du Preez is Senior Manager of Restructuring Services, Corporate Finance, at Deloitte .