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Business Rescue: Areas of Concern For Banks

Oct 22, 2018
  • Post-commencement financing (i.e. will there be a willingness on the part of banks and financial institutions to provide post-commencement finance during BRP? If so, will a company under supervision have the requisite assets to provide security for continued funding? Many of the company’s assets might already be encumbered at the time proceedings commence);

 

  • The practitioner’s discretion to suspend current contracts of the company (i.e. any banking institution which is a party to a loan / overdraft agreement might find that such agreement is suspended by the practitioner. The result for the bank is a concurrent claim against the company for damages);

 

  • Without the leave of the court, any enforcement of a guarantee or surety by a company in favour of a banking institution during BRP is prohibited;

 

  • The development, preparation and proposal of the business rescue plan is driven by the practitioner and not by the creditors of the company. Thus, the practitioner will consult with the creditors, shareholders, employees and trade unions, but, such practitioner is not obliged to follow the instructions of any such group;

 

  • The BRP process insofar as it is court driven may become cumbersome due to the backlog of matters in our courts; and

 

  • During the period of a s 155 compromise being negotiated with all stakeholders, any creditor could apply either for BRP or the liquidation of the company, in which event proceedings under s 155 would not be competent.
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