• Is Cell C sustainable?

    Is the mobile operator another African Bank in the making, asks Gugu Lourie.

  • Alliances that work

    Mutually adding value secures the employer-employee relationship, says Ian Mann.

  • Without prejudice

    We all need to fight the ugly bigotry that’s made news recently, says Mandi Smallhorne.

See More

Tickets for 1time?

Aug 22 2012 16:45 Fin24

Related Articles

1time shares crash

1time chief quits

Airline expands routes with flights to Kenya

Fuel costs, low demand push 1time into loss

1time hit by fuel prices, weak demand

1time applies for business rescue

Cape Town - Companies are not using business rescue provisions in the new Companies Act as they were intended and the process is therefore not often successful in turning companies around, said Clinton Pavlovic, Senior Associate at Pietersen Incorporated.

He was responding to an announcement late on Tuesday by no-frills airline operator 1time Holdings [JSE:1TM] that it was applying for business rescue proceedings due to financial distress at its subsidiary companies 1time Airline Proprietary Limited and Jetworx Aircraft Services Proprietary Limited.

Pavlovic said 1Time's business rescue call has occurred in the wake of the recent failure of another domestic airline in similar circumstances.

“Prudence and fiduciary responsibility to both shareholders and other shareholders would have compelled the airline to make its decision.

“Let’s hope it’s not too late.”

Pavlovic said business rescue is always preferable to liquidation for all stakeholders, especially employees as it provides an opportunity to save the business.

 “But in many cases directors delay implementing business rescue proceedings until it is too late and the company is technically insolvent.”

He said business rescue is generally seen more as a delaying tactic to hold off creditors, after which the company goes into liquidation anyway.

Creditors can oppose the action in court if they feel there is no reasonable prospect of rescuing the company.

“Without the buy-in of major creditors, the business rescue process simply won’t be successful,” he said.  

Under section 129 of the Companies Act, the board of directors can voluntarily place a company into business rescue when it runs into financial distress.  But many boards avoid doing this as it sends out a negative message to creditors and investors.

1time’s share price plunged over 42.86% to 8c a share on Wednesday on the news that it was applying for business rescue proceedings.

1time’s board said it believes the implementation of business rescue will afford the executive directors the opportunity to develop and implement the business rescue plan in a manner that will optimise the likelihood of the subsidiaries continuing to exist as going concerns.

Pavlovic said that although the board of directors continue to exercise their function under business rescue, it is subject to the authority of an appointed turnaround practitioner.

“The boards’ hands are tied in many ways, as the turnaround specialist must sign off all decisions.”

He said creditors have to decide whether they will cooperate and wait to see if the turnaround strategy works, or oppose the resolution and file for the company’s liquidation instead.

* Follow Fin24 on Facebook, Twitter and Google+.

1time  |  business rescue



Latest Articles

15 Investment Tips for 2015
Tax-free saving accounts are coming
Which generator is right for you?
5 top tips to help you save on your next grocery bill Read More...

Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Add your comment
Comment 0 characters remaining

Company Snapshot

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...