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Tougher stance towards business rescue practitioners

Jun 29 2017 19:27

Cape Town - Changes to the legal framework and regulation of business rescue, particularly to registration of practitioners, will take effect as from 1 October 2017.

Business rescue, which was introduced in South Africa as an alternative to insolvency, came into effect via the Companies Act in 2011.

"Although relatively successful, business rescue has received criticism resulting from apparent flaws in the appointment process and quality of business rescue practitioners. In order to assure competence and efficiency, it has been widely agreed that the regulation of business rescue practitioners is important in the preservation and integrity of the business rescue procedure," explained PJ Veldhuizen, CEO of boutique law firm Gillan and Veldhuizen.

New legislation will require attorneys, accountants, liquidators and business management professionals, who seek to practise as business rescue professionals, to register via their SA Qualifications Authority (SAQA) approved governing bodies.

These professional bodies will be required to apply for accreditation via the Companies and Intellectual Property Commission (CIPC), setting out that they comply with professional rules and disciplines in order to be able to accredit their own members.

"Practitioners as well as aspiring practitioners are advised to belong to a legal, accounting or business management profession recognised by the SA Qualifications Authority (SAQA). Professional bodies have until 1 October to comply, after which no person will be licensed as a business rescue practitioner unless he or she belongs to the registered and accredited profession," said Veldhuizen. 

READ: Business rescue explained  

Currently, business rescue practitioners are granted an individual licence by the Companies and Intellectual Property Commission (CIPC). A recent notice issued by the CIPC, however, stated that from 1 October 2017 practitioners will be required to register through their various professional bodies.

These would include the Law Society of SA, the SA Restructuring and Insolvency Practitioners Association (SARIPA), the Chartered Institute of Management Accountants (CIMA) and the SA Institute of Chartered Accountants (SAICA).

“The responsibility of a business rescue practitioner is onerous. When appointed, they effectively take over the running of a stressed company and step into the shoes of the CEO or board of directors. They are also officers of the court and, therefore, have the fiduciary duty of a director. This certainly requires oversight," said Veldhuizen.

He also highlighted the requirement that a company under business rescue needs to have a port of call in order to hold business rescue practitioners accountable.

“Up until now disgruntled parties were forced to turn to the courts for assistance, which can be a lengthy and expensive process. Business rescue practitioners will now be bound by a professional disciplinary code that will include a sanction to act on unethical conduct or inappropriate behaviour,” Veldhuizen said.

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