The sources and obstacles of post-commencement finance in South Africa : a comparison with the United Kingdom and Australia

LL.M. (Mercantile Law)Rescue refers to the restructuring of a company which would be necessary in order to preserve the said company and reinstate the entity‟s status to one of viability and profitability. One of the success factors of a business rescue is to develop and implement a business rescue plan, with one of the critical components of a successful business rescue plan involving securing post-commencement finance, which would be necessary to adhere to trade obligations as well as attempting to restore the company to a solvent position. The absence of post-commencement finance can result in the failure of business rescue altogether and thus the Companies Act has introduced a system of preference ranking in order to stimulate the required funding. This classification is encapsulated in section 135 of Chapter 6 in the Companies Act 71 of 2008. There is a prevalent shift of ideology from placing restrictions on a distressed company and a movement towards a capitalist approach creating a foundation for growth and re-entrance into the economy whereby distressed companies may continue as going concerns in terms of section 7(c) of the Companies Act, which will ultimately improve trade through the adherence to international standards ensuring employment as well as economic social benefits in section 7(d) of the Companies Act. The focus on distressed companies has allowed for the emphasis of previous legislation to be shifted away from a creditor-friendly approach to a debtor-friendly approach. This dissertation will attempt to briefly describe business rescue and analyse the concept and obstacles with regards to the provision of post-commencement finance in South Africa as well as international jurisdictions, specifically Australia and the United Kingdom..