Times Of Swaziland: BUSINESS RESCUE NOT OPTION FOR ESWATINI?

BUSINESS RESCUE NOT OPTION FOR ESWATINI?
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BY ASHMOND NZIMA  on 08/05/2020 01:18:00


MBABANE – While most companies globally, including South Africa, are filing
for business rescue, it seems it is not an option for the country.
A lot of companies are in distress due to the impact of COVID-19. Experts say
the business rescue process can provide the company with the opportunity needed
to reorganise and restructure its affairs, and to structure a payment scheme
with its creditors, while also saving jobs and allowing the business to continue
trading as an economically contributing entity.
Most companies in South Africa are now entering business rescue. South African
carrier Comair has become the latest operator in that country to enter business
rescue, as it aims to restructure to deal with the coronavirus crisis.
Comair is a British Airways franchise partner and also operates the budget brand
Kulula. South African Airways and regional carrier SA Express have previously
entered business rescue.
The South African companies filing for business rescue are using the that
country’s Companies Act 2008, which says such a move aims to facilitate the
rehabilitation of a company that is ‘financially distressed’ by providing
for: the temporary supervision of the company and management of its affairs,
business and property by a business rescue practitioner, a temporary moratorium
(‘stay’) 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 business rescue plan to rescue the company by restructuring its business,
property, debt, affairs, other liabilities and equity.
In Eswatini, Registrar of Companies Msebe Malinga confirmed that there was no
specific section on business rescue in the Companies Act of 2009.
He said instead there was the judicial management, as per Section 365 of the
Act.
According to the Act, circumstances in which company may be placed under
judicial management is when by any reason of mismanagement or for any other
cause, it is unable to pay its debts or is probably unable to meet its
obligations and it has not become or is prevented from becoming a successful
concern.
Debts
It is also placed under this category when there is a reasonable probability
that, if placed under judicial management, it would be able to pay its debts or
meet its obligations and become a successful concern.
“The court may grant a judicial management order in respect of such company.
An application to court for a judicial management order in respect of any
company may be made by any of the persons who are entitled under Section 289 to
make an application to court for the winding-up of a company, and the provisions
of Section 289(3) as to the application for winding-up shall, mutatis mutandis,
apply to an application for a judicial management order.
Grounds
“When an application for the winding-up of a company is made to court under
this Act and it appears to the court that if the company is placed under
judicial management, the grounds for its winding-up may be removed and that it
will become a successful concern and that the granting of a judicial management
order would be just and equitable, the court may grant such an order in respect
of such company,” reads the Act in part.
Judicial management can be generally defined as a method of debt restructuring
where an independent judicial manager is appointed to manage the affairs,
business and property of a company under financial distress.
The company is also temporarily shielded from legal proceedings by
third-parties, giving it the opportunity to rehabilitate.