Business rescue practitioners in for regulation
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 a solution to insolvency, came into effect via Chapter 6 of 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.
Currently, business rescue practitioners have been granted an individual licence by the CIPC, without confirming membership to a profession. A recent notice issued by the CIPC informed of a Notice of a Transitional period of Conditional Licences: from 1 October 2017 practitioners will be required to register through their various professional bodies, e.g. The Law Society of South Africa, SARIPA, CIMA, SAICA, etc. New legislation will require attorneys, accountants, liquidators and business management professionals who seek to practise as business rescue professionals to register via their SAQA-approved governing bodies. Moreover, these professional bodies will be required to apply for accreditation via 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 South African 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/she belongs to the registered profession.
PJ Veldhuizen, CEO of Gillan and Veldhuizen Incorporated, who is completing a doctorate on regulation of business rescue, has been instrumental in the restructure and regulation of business rescue in South Africa. According to Veldhuizen, in order to mitigate arbitrage or applicants opting for a less stringent accreditation process, standardization of compliance is paramount. The CIPC board is finalising a Continued Professional Development programme that will require practitioners to complete a prescribed number of verifiable hours training by accredited trainers annually.
In support of the recent notice, Veldhuizen stresses: “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/Board of Directors. They are also Officers of the Court and therefore have the fiduciary duty of a director – this certainly requires oversight.” Veldhuizen also highlights 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.”