A company in business rescue is not closing down. It has been placed under the supervision of a licensed practitioner who takes over management control, freezes most legal claims against the company, and has 25 business days to put a plan to creditors showing how the business can be restored to solvency or, failing that, how creditors will do better than they would in a liquidation.
The process lives in Chapter 6 of the Companies Act 71 of 2008. It is not a soft option and it is not a way to avoid paying people. It is a supervised window in which a company that still has a workable business underneath its debt gets a chance to prove it.
When does a company qualify for business rescue?
The test is set out in section 128(1)(f), and it turns on the word “distressed” rather than “broke”. A company is financially distressed if either of the following is true:
- It appears reasonably unlikely that the company will be able to pay all of its debts as they fall due within the next six months.
- It appears reasonably likely that the company will become insolvent within the next six months.
Two things follow from that wording. The first is that a company does not have to be insolvent yet. The six-month forward look is deliberate, because a company that waits until the money has actually run out has usually destroyed the very thing a practitioner would need to work with. The second is that there must also be a reasonable prospect of rescuing the company. Distress alone is not enough. A business with no realistic path back is a liquidation, and a court will say so.
Directors who see that six-month horizon closing and do nothing are exposed personally. Section 22 prohibits trading recklessly or while insolvent, and what follows from ignoring it is covered in our guide on how to avoid being a delinquent director under the Companies Act.
How business rescue starts: the two routes in
The board resolves to file. Under section 129 the directors pass a resolution and file it with the Companies and Intellectual Property Commission. The clock then runs fast. Within five business days the company must notify every affected person, meaning creditors, shareholders, employees and any registered trade union, and it must appoint a practitioner. Miss those deadlines and the resolution lapses. One hard limit applies: the board cannot take this route once liquidation proceedings have already been started against the company.
An affected person applies to court. Under section 131 a creditor, shareholder, employee or trade union can ask a court to place the company under supervision. The court grants the order if it is satisfied the company is financially distressed and that rescue is reasonably possible. This is the route used when creditors believe the business is salvageable but the board is not acting.
What changes the moment proceedings begin
Business rescue is worth something because of the protection that attaches on day one.
Claims are frozen. Section 133 imposes a general moratorium. No legal proceeding or enforcement action can be brought or continued against the company without the practitioner’s written consent or the leave of a court. Sheriffs stop, attachments stop, and creditors who were about to take judgment have to wait. Criminal proceedings and certain regulatory actions are carved out.
The practitioner runs the company. Directors stay in office and must hand over books, records and cooperation, but full management control passes to the practitioner.
New funding jumps the queue. Section 135 allows the company to raise post-commencement finance, which can be secured over unencumbered assets and ranks ahead of unsecured claims that existed before rescue began. Without this, nobody would lend to a company in trouble. Employee wages that become due during proceedings enjoy the same preference.
Employment continues. Under section 136 employees stay on their existing terms unless they agree otherwise. Retrenchments remain possible, but they must follow the ordinary section 189 process under the Labour Relations Act.
The timeline creditors should hold the practitioner to
Chapter 6 is unusually specific about dates, and those dates are the best early signal of whether a rescue is being run properly.
- Within 10 business days of appointment, the practitioner must convene a first meeting of creditors and a separate meeting of employees, and give an honest view of the prospects of rescuing the company.
- Within 25 business days of appointment, the business rescue plan must be published. Extensions are possible with creditor consent or a court order, and repeated extensions are worth reading as a warning.
- Within 10 business days of publication, the practitioner must convene the meeting at which the plan is voted on.
A plan is adopted if more than 75% of the creditors’ voting interests that were actually voted support it, and at least 50% of the independent creditors’ voting interests that were voted support it as well. That double threshold means a single large related-party creditor cannot push a plan through on its own.
If proceedings run past three months, the practitioner must report monthly and apply to court for an extension.
What has to be in the business rescue plan
Section 150 sets the contents, and the plan falls into three parts. The background covers assets and liabilities, a full creditor list showing who is secured and who is not, the likely dividend if the company were liquidated instead, and the practitioner’s remuneration. The proposals cover what creditors are being asked to accept: payment holidays, debt written off, assets sold, contracts kept or ended, and a comparison showing what creditors would receive under the plan against what they would receive in a liquidation. The assumptions and conditions set out what must be true for the plan to work, how the rescue ends, and the effect on employees.
That liquidation comparison is the heart of the document. Creditors are not being asked to be generous. They are being asked to choose the better of two outcomes, which is why an accurate aged creditors and debtors report matters so much before filing.
What business rescue costs
Regulation 128 caps the practitioner’s basic hourly fee according to the size of the company, inclusive of VAT:
- Small company: R1 250 an hour, to a maximum of R15 625 a day
- Medium company: R1 500 an hour, to a maximum of R18 750 a day
- Large or state-owned company: R2 000 an hour, to a maximum of R25 000 a day
Those are ceilings on basic remuneration only. The practitioner may also recover actual disbursements, and further remuneration linked to a successful outcome can be agreed, subject to approval by creditors and holders of the company’s securities. Legal and accounting support is billed on top. For a small company, a rescue that runs several months is a serious expense, and it is paid ahead of the creditors who are being asked to take less.
Does business rescue actually work?
It works for a minority of the companies that enter it, and the odds improve sharply the earlier a company files. A Companies and Intellectual Property Commission report covering 2011 to June 2022 recorded roughly 4 370 companies entering business rescue, of which about 19% reached substantial implementation of an adopted plan.
That figure needs reading carefully. Substantial implementation is a demanding measure. Studies that define success more broadly, counting rescues that delivered creditors a better return than liquidation would have, report considerably higher rates. Both numbers can be true at once, because they are measuring different things.
What is consistent across the research is the timing effect. Companies that file while there is still working capital and a functioning customer base give a practitioner something to restructure. Companies that file when the bank account is empty and staff have not been paid are usually converting a liquidation into a more expensive liquidation.
Business rescue or liquidation
Liquidation ends the company. Assets are sold, the proceeds are distributed in order of preference, employees are dismissed, and there is nothing left afterwards. Our guide on what to weigh up when you have to liquidate covers that route.
Business rescue is worth attempting where the trading business is sound and the balance sheet is the problem: a company with real customers and workable margins that took on debt it cannot now service, or that lost a major contract and needs time to replace it. It is the wrong tool where the business model itself has stopped working.
Most companies that reach this decision got there through a cash flow problem that was visible months earlier. Tightening collections and funding the gap properly, covered in our guide to cash flow solutions for SMEs, is a far cheaper intervention than Chapter 6.
Frequently asked questions
Who can put a company into business rescue?
The board can, by resolution filed with the CIPC under section 129. An affected person, meaning a creditor, shareholder, employee or registered trade union, can apply to court under section 131.
Can creditors still sue a company in business rescue?
Generally no. The section 133 moratorium blocks legal proceedings and enforcement action for the duration of the rescue unless the practitioner consents in writing or a court grants leave.
Do employees keep their jobs?
Employment continues on existing terms under section 136. Retrenchment during rescue is possible but must follow the section 189 process under the Labour Relations Act, and wages that fall due during proceedings rank as post-commencement finance.
How long does business rescue last?
There is no fixed limit. The plan must be published within 25 business days of appointment, and if the rescue runs beyond three months the practitioner must report monthly and obtain a court extension. It ends when the plan is substantially implemented, when the practitioner files a notice of termination, or when a court sets the proceedings aside.
What happens if creditors reject the plan?
The practitioner can seek a vote to prepare a revised plan, an affected person can apply to court to set the vote aside as inappropriate, or an affected person can offer to buy out the voting interests of those who opposed it. Where none of that succeeds, the company is usually liquidated.
Before you file
Two practical points. Only a practitioner licensed by the CIPC may be appointed, so verify the licence before signing anything. And confirm the company’s own filings are current, because a company that has drifted towards CIPC deregistration creates avoidable complications at exactly the wrong moment.
This article was updated in September 2026.
