BUSINESS RESCUESAVING DISTRESSED COMPANIES

ERIC LEVENSTEIN & LAUREN BECKER

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GENERAL OVERVIEW

> Companies Act 71 of 2008 (Act) - 1 May 2011

> Introduced - new process of restructuring companies in financial distress - business rescue

> Overview and terminology

> Role players

> Test for business rescue and duty of directors

> Entry into business rescue

> Moratorium – Stay on Legal Proceedings

> Funding and the ranking of claims

> Voting on a business rescue plan

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ORIGINS OF THE BUSINESS RESCUE CONCEPT

> Similar to the USA Chapter 11 proceedings & United Kingdom Administration proceedings

> Principles –

> moratorium –

> crucial for the success of a corporate rescue procedure

> some jurisdictions allow for a wide moratorium, some offer more limited protection

> creates breathing space to facilitate the process

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ORIGINS OF THE BUSINESS RESCUE CONCEPT

> cram-down provision –

> need to bind dissenting creditors (avoids smaller creditors holding larger creditors to ransom)

> without it, minority creditors can hold process to ransom by holding out for a “better deal”

> majority of creditors required to make process workable

> is the sanction of the court needed to ensure equitable treatment of creditors or can one proceed with the informal “private pre-pack” option

> South Africa – judicial management replaced by the new business rescue regime

STATISTICS

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BUSINESS RESCUE CIPC STATISTICS - 2014

> Number of business rescues that have commenced from May 2011 to 30 September 2014 – 1490

> From the above –

> nullities – 155

> invalid filings – 100

> Number of those business rescues that subsequently went into liquidation – 112

> Business rescue per entity category –

> private companies – 64%

> public companies – 5%

> close corporations – 31%

Courtesy of C Klokow from the CIPC – 7 October 2014

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BUSINESS RESCUE CIPC STATISTICS - 2014

> Business rescue per province -

> Practitioners – 201 licensed

> senior -37%

> experienced – 40%

> junior – 23%

> Identity of business rescue practitioners – accountants (42%), business management (11%) and lawyers (42%)

Gauteng – 32% Western Cape – 12%

Kwa-Zulu Natal – 5% Easter Cape – 3%

North West – 3% Free State – 3%

Limpopo – 2% Mpumalanga - 2%

Unknown – 38%

Courtesy of C Klokow from the CIPC – 7 October 2014

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BUSINESS RESCUE CIPC STATISTICS - 2014

Courtesy of C Klokow from the CIPC – 7 October 2014

SNAPSHOT OF BUSINESS

RESCUE

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DEFINITIONS

> Definitions relevant to the business rescue provisions of the Act

> Affected Person – shareholder, creditor, registered trade union representing employees of the company or if any of the employees of the company are not represented by a registered trade union, each of those employees or their respective representatives

> Business Rescue - proceedings to facilitate the rehabilitation of a company that is financially distressed by providing for—

> temporary supervision of the company, and of the management of its affairs, business and property;

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DEFINITIONS

> temporary moratorium on the rights of claimants against the company or in respect of property in its possession; and

> development and implementation, if approved, of a plan to rescue the company by restructuring its affairs, business, property, debt and other liabilities, and equity in a manner that –

> maximizes the likelihood of the company continuing in existence on a solvent basis; or

> results in a better return for the company’s creditors or shareholders than would result from the immediate liquidation of the company

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DEFINITIONS

> Business Rescue Practitioner - a person appointed or two or more persons appointed jointly, to oversee a company during business rescue proceedings –

> two or more persons (could also include a junior and an experienced or senior practitioner)

> “person” (natural or juristic) – contemplates appointment of a company but cannot appoint a company as a business rescue practitioner (Aldrige Mark Fisher v Vusela Construction Proprietary Limited – 2014 (Cape Town))

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ROLE PLAYERS IN BUSINESS RESCUE

COMPANY

SHAREHOLDERS

POST

COMMENCEMENT

FINANCIERS

BUSINESS

RESCUE

PRACTITIONER

CREDITORS

SECURITY

HOLDERS

TRADE

UNION

ATTORNEY

COURT/CIPC

EMPLOYEES

DIRECTORS

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TEST FOR BUSINESS RESCUE

> Financially Distressed - 6 month forward looking test -> it appears to be reasonably unlikely that the company

will be able to pay all of its debts as they fall due and payable within the immediately ensuing six months (commercial insolvency test); or

> it appears to be reasonably likely that the company will become “insolvent” within the immediately ensuing six months (factual/balance sheet insolvency).

> Clear distinction between “insolvent” and “financial distress”

> Business rescue test – > forward looking test > contemplates impending insolvency (commercial

insolvency or factual insolvency)

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WHEN TO BEGIN BUSINESS RESCUE

> Welman v Marcelle Props 193 CC & Another (2012) JOL 28714 (GSJ)

“business rescue proceedings are not for terminally ill close corporations. Nor are they for chronically ill. They are for ailing corporations, which given time will be rescued and become solvent”

> First signs of financial distress – company must apply for business rescue

> If more than just “financially distressed” the company must consider other options such as a liquidation

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ENTRY INTO BUSINESS RESCUE

Voluntary Business Rescue Board resolution passed by a simple majority Practitioner is nominated in the resolution Company is financially distressed (ie will not be solvent

on its balance sheet or will not be able to pay its debts when they fall due within the next six months)

Reasonable prospect that the company can be saved.

Cannot adopt a resolution is liquidation proceedings have been initiated

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ENTRY INTO BUSINESS RESCUE

Compulsory Business Rescue Affected person (shareholder, creditor or employee)

makes application to court Company is financially distressed Company has failed to pay over any amount in terms of

an obligation under or in terms of public regulation, or contract, with respect to employment related matters

Just and equitable to do so for financial reasons There is a reasonable prospect of rescuing the company

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PROCESS AND TIME PERIODS

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Practitioner Appointed

Delivery up by Directors of All

Books and Records

As Soon as

Practicable5 Days

Directors to Provide

Statement of Affairs

First Meeting of

Creditors/Employees

10 Days from Date of Appointment

Preparation & Publication of

Plan

25 Days from Date of Appointment

Section 152 Meeting to Consider

& Vote on Plan

10

days

Approved & Plan Implemented

If Rejected - Vote on Revised Plan/Apply to Court to Set

Aside Inappropriate Vote/Offer to Purchase Voting Interests of

Dissenting Parties

If Rejected & No Steps Taken – BRP to File Termination

Notice & Place Company in Liquidation

Note: Business Rescue Should Generally End Within 3 Months, or an Extended Time as Granted by Court

on Application by Practitioner

(Days = Business Days)

Section 150(5)

Inform Regulatory

Authorities of Commencement

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IMPORTANT FEATURES

Moratorium Stay on Legal Proceedings & Enforcement Action Against the Company and in respect of Property Belonging to the Company or Lawfully in its Possession

Post-Commencement Finance

That which becomes due and owing to employees during business rescue proceedings for rendering services to the company and funding which is provided to a company, during the company’s business rescue, by means unrelated to employment (including the provision of credit or services during business rescue)

Management of Company

Business rescue practitioner has full management control of the company in substitution for the board of directors. The board maintains its powers and duties but all decisions must be taken with the approval of the business rescue practitioner – otherwise all transactions are void!

Contracts Certain provisions/the whole contract may be suspended or cancelled by the business rescue practitioner. Cancellation can only be done following an application by the practitioner to court

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IMPORTANT FEATURES

Employees Remain employed unless they are retrenched in accordance with labour legislation (Section 189 of the Labour Relations Act)

Stakeholders Continuously engaged by the business rescue practitioner in the process. Creditors get a vote on the plan at the value of their claim (unless their claim is subordinated by agreement). Shareholders vote on the plan if their rights are affected by the plan

Voting on Plan

Plan will be approved if more than 75% of the creditors, voting at value, vote in favour of the plan and 50% of the independent creditors vote in favour of the plan

Binding Offer

A creditor or shareholder may buy the voting interest of another creditor or shareholder who voted against the adoption of a plan if such vote results in the plan not being adopted

Cram Down An adopted business rescue plan is binding on all creditors whether or not they voted in favour of the plan, against the plan, were present at the meeting or proved a claim

Discharge of Debt

Unless a business rescue plan provides otherwise, creditors and/or shareholders whose claims are compromised by the business rescue plan are prohibited from enforcing the balance of their claims after the adoption of the plan (even against sureties) – does not apply to guarantees!

DUTY OF DIRECTORS BEFORE BUSINESS RESCUE

> Directors have an obligation to consider the financial state of the company

> If company is financially distressed, the directors have two choices –

> pass a resolution to commence business rescue; or

> send out what is commonly referred to as a “section 129(7) notice”–

> notify affected persons of the nature of the company’s financial distress (ie impending commercial or balance sheet insolvency); and

> reasons for not adopting a resolution to commence business rescue

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DUTY OF DIRECTORS BEFORE BUSINESS RESCUE

> Notice needs to be carefully considered – could constitute an “act of insolvency”, cause suppliers to stop supplying the company or precipitate a compulsory business rescue

> Failure to comply may result in personal liability for directors

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FOCUS ON IMPORTANT FEATURES

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STAY ON LEGAL PROCEEDINGS

> Moratorium –

> designed to provide the company with “breathing space” while the business rescue practitioner attempts to rescue the company through the preparation and implementation of the business rescue plan

> without this element, a creditor would be able to enforce its rights during the process or apply for the liquidation of the company

> No legal proceedings (including enforcement action) against the company or in relation to any property belonging to the company, or lawfully in its possession, may be commenced or proceeded with in any forum

> Fabrizio Burba v Integcomm Proprietary Limited – meaning of legal proceedings and forum was considered. Held – unfair dismissal proceedings constitute legal proceedings in terms of section 133 and would be stayed.

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STAY ON LEGAL PROCEEDINGS

> Madodza (Pty) Ltd v Absa Bank & Others (GNP) 2012 –

> court orders obtained prior to the commencement of business rescue for the return of vehicles financed by financial institutions

> vehicles were not property of the company or property lawfully within the possession of the company in business rescue –

> the finance agreements were cancelled for non-payment prior to business rescue

> court ordered the return of the vehicles prior to business rescue

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EXCEPTIONS TO THE MORATORIUM

> Exceptions to the application of the moratorium -

> with the written consent of the practitioner

> with the leave of the court – must be well motivated (Redpath Mining South Africa (Pty) Ltd v Piers Marsden NO & Others (SGHC) (2012))

> as a set-off against any claim made by the company in legal proceedings, irrespective of when the proceedings commence

> criminal proceedings against the company/directors

> proceedings concerning any property or right over which the company exercises the powers of a trustee

> proceedings by a regulatory authority in the execution of its duties after written notification to the practitioner

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POST-COMMENCEMENT FINANCE & SECURITY

> Act - introduced a concept called Post-Commencement Finance (“PCF”)

> Distinguishes between two types of PCF –

> that which becomes due and owing to employees during business rescue proceedings for rendering services to the company

> funding which is provided to a company, during the company’s business rescue, by means unrelated to employment

> PCF may be provided in exchange for security over unencumbered assets of the company

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POST-COMMENCEMENT FINANCE & SECURITY

> PCF - financier will generally provide PCF if it will be guaranteed security from a company in business rescue so that it’s claim against the company will rank in priority to the claims of previously unsecured creditors, but behind the claims of the practitioner and the employees for services rendered during business rescue

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SOURCE OF POST-COMMENCEMENT FINANCE

> During business rescue, funding may be generated from –

> loans from shareholders

> further funding from current financiers or lenders

> new funding from new financiers or lenders

> services rendered by current suppliers of the company to it during business rescue

> Importantly, services that continue to be supplied by creditors of a company in business rescue constitutes PCF - ie: the provision of premises to a company in business rescue

RANKING OF CLAIMS

> Merchant West Working Capital Solutions (Pty) Ltd v Advanced Technologies & Engineering Company (Pty) Ltd & Gainsford 2013

> Order of preference during business rescue proceedings –

> fees and expenses (including legal and other professional fees) of the business rescue practitioner incurred during business rescue proceedings

> fees of employees which become due and payable after the commencement of business rescue

> secured lenders or creditors for any loan or supply made after the commencement of business rescue (ie secured PCF)

> unsecured lenders or creditors for any loan or supply made after the commencement of business rescue (ie unsecured PCF)

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RANKING OF CLAIMS

> claims of employees (for instance for remuneration) which became due and owing prior to the commencement of business rescue

> unsecured lenders or creditors for any loan or supply made before the commencement of business rescue (ie concurrent creditors)

> Controversial - it was an obiter decision (remark made in passing and not an issue before the court)

> Applies to free residue and not to security interests.

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EFFECT OF BUSINESS RESCUE ON STAKEHOLDERS

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EFFECT ON CONTRACTS

> Practitioner may -

> entirely, partially or conditionally suspend, for the duration of the proceedings, any obligation of the company that -

> arises under an agreement to which the company was a party at the commencement of the proceedings; and

> would otherwise become due during those proceedings; or

> apply urgently to court to entirely, partially or conditionally cancel, on any terms that are just and reasonable in the circumstances, any agreement to which the company is party

> Other party to the agreement may only assert claim for damages (no specific performance) – radical departure

> Can only cancel if apply to court

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> Must continue to exercise their functions as directors, subject to authority of the practitioner (board is not replaced)

> Have a duty to the company to exercise any management function within the company in accordance with the express instructions or direction of the practitioner (to the extent that it is reasonable to do so)

> Must attend to the requests of the practitioner at all times, and provide any requested information about the affairs of the company as may reasonably be required

> Is this a “debtor in possession” scenario?

> Is there an implication that “directors” will continue to manage the company and not the practitioner? – Probably not, but depends on the skill of the practitioner in managing this process and interaction with directors

> Directors may try and appoint their own nominee/puppet practitioner. Can be dangerous as “bad” directors remain in control… DIP is the result!

EFFECT ON DIRECTORS

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EFFECT ON CREDITORS

> Creditors entitled to –

> notice of each court proceeding, decision, meeting or other

relevant event

> participate in every court proceeding arising from business

rescue

> formally participate in company’s business rescue proceedings

> informally participate in the proceedings by making proposals

for a plan to the practitioner

> the right to vote to amend, approve or reject a plan and, if the

plan is rejected, to propose the development of an alternative

plan or present an offer to acquire the interests of any or all of

the other creditors in terms of section 153

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EFFECT ON CREDITORS

> Creditors’ committee - through that committee to be consulted by the practitioner on the development of a plan

> Provisions relating to voting interests in section 145(4) –

> a secured or unsecured creditor (preferrent creditor) has a voting interest equal to the value of the amount owed to that creditor by the company; and

> a concurrent creditor who would be subordinated in a liquidation has a voting interest, as independently and expertly appraised and valued at the request of the practitioner, equal to the amount, if any, that the creditor could reasonably expect to receive in such a liquidation of the company

> Practitioner must determine whether creditors are independent for purposes of the proceeding and request a suitably independent person to independently and expertly appraise and value an interest contemplated in section 145(4).

> Such valuation is subject to review together with a re-valuation of the creditors’ voting interest

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EFFECT ON EMPLOYEES

>Employees continue to be employed on same terms and conditions except –

> changes in the ordinary course of attrition

> where employees and company jointly agree to change terms

>Any retrenchment must be in accordance with applicable employment legislation -

> section 189 in the case of small scale retrenchments

> Section 189A in the case of large scale retrenchments

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EFFECT ON EMPLOYEES

> Employees are entitled to -

> notice of each court proceeding, decision, meeting or other relevant event

> participate in the business rescue and related matters

> form a committee

> be consulted by practitioner (first meeting of employees 10 business days after the practitioner is appointed)

> be present and make submission at the meeting of creditors when the plan is voted on

> vote with creditors to approve the plan, if a creditor

> if the plan is rejected, propose the development of an alternate plan or present an offer to acquire the interests of one or more affected persons

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SHAREHOLDERS’ RIGHTS

> If the plan does alter (impair) the rights of any class of holders of the company's securities then –

> practitioner must call a meeting of the holders of the class or classes of securities whose rights would be altered by the plan and call for a vote by them to approve the adoption of the proposed plan; and

> if, in a vote, (contemplated by (i)), a majority (51%) of the voting rights that were exercised, support the plan, it will have been finally adopted

BUSINESS RESCUE PRACTITIONERS

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BUSINESS RESCUE PRACTITIONERS

> Qualifications for business rescue practitioner –

> a member in good standing of a legal, accounting or business management profession accredited by CIPC; and

> be licensed as such by CIPC.

> Regulation 126 suggests that a person who is part of an accredited profession need not be licensed by CIPC

> CIPC advised that they are not accrediting certain professions for now

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BUSINESS RESCUE PRACTITIONERS

> Further, prospective business rescue practitioner –

> must not be subject to an order of probation;

> must not be disqualified from acting as a director of a company in terms of section 69(8) of the Act;

> must not have any relationship with the company that would lead a reasonable and informed third party to conclude that the integrity, impartiality or objectivity of that person is compromised by such relationship; and

> must not be related to a person who has a relationship as contemplated above.

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CATEGORIES OF PRACTITIONERS

> Public interest score determines size of the company and in turn the type of practitioner needed (regulation 26(2))

> Senior practitioner –

> ten years experience

> medium company (public interest score between 100 and 500) or a large company (public interest score of 500 or more)

> Experienced practitioner –

> five years experience

> small company (public interest score of less than 100) or for a medium company (public interest score between 100 and 500)

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CATEGORIES OF PRACTITIONERS

> Junior practitioner –

> has not previously engaged in business turnaround before the effective date of the Act or acted as a business rescue practitioner in terms of the Act; or

> has actively engaged in business turnaround practice before the effective date of the Act or as a business rescue practitioner for period of less than five years

> small companies (public interest score of less than 100)

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REMUNERATION OF PRACTITIONER

> Charge for remuneration and expenses

> Tariff –

> R1250 per hour (max of R15 625 per day) (incl VAT) - small company

> R1500 per hour (max of R18 750 per day) (incl VAT) - medium company; or

> R2000 per hour (max of R25 000 per day) (incl VAT) - large company or state owned company

> Contingency agreement –

> additional remuneration based on agreed incentives

> approved by holders of a majority of the creditors’ voting interests and holders of a majority of the voting rights attached to any shares of the company

> Practitioner - reimbursed for actual costs of disbursements incurred by the practitioner, or expenses incurred by practitioner, to extent reasonably necessary to carry out the practitioner’s functions and to facilitate the conduct of the business rescue (Murgatroyd v Van den Heever NO 2014 Johannesburg )

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> Full management control in substitution for the company’s board and pre-existing management, but may delegate powers to former board member or pre-existing management

> May remove from office any existing officer or appoint any new officer

> Unclear what is meant by “in substitution for the company’s board” as “directors must continue to exercise the functions of director, subject to the authority of the practitioner” (section 137(2)(a))

POWERS OF PRACTITIONERS

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DUTIES OF PRACTITIONER

> Must investigate affairs and then decide if there is any prospect of rescuing the company (if not, must inform court and apply for termination of proceedings and commencement of liquidation)

> If evidence of voidable transactions found, reckless trading or fraud, practitioner must forward the evidence to the appropriate authorities for further investigation and/or prosecution and must also direct management to rectify matter including recovering any misappropriated assets of the company

> What is meant by a “voidable transaction” in the context of business rescue?

> Importantly there is no sanction on practitioner if non-compliance with these obligations!

> Question arises as to whether practitioner should have similar rights to liquidator under insolvency? (section 417 enquiries)

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REMOVAL OF BUSINESS RESCUE PRACTITIONER

> Practitioner may be removed –> section 130 - by order of court on the basis that –

> practitioner does not satisfy the requirements for section 138

> is not independent of the company or its management

> Lacks the necessary skills having regard to the company’s circumstances

> section 139 – grounds for removal on request of an affected person or by the court of its own accord –> incompetence or failure to perform duties> failure to exercise proper degree of care in the

performance of functions> engaging in illegal acts or conduct

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REMOVAL OF BUSINESS RESCUE PRACTITIONER

> conflict of interest or lack of independence

> incapacitated or unable to perform the functions of that office and is unlikely to regain that capacity within a reasonable time

> Company or affected person who nominated a practitioner, must appoint a new one if the practitioner dies, resigns or is removed from office (which is subject to any affected person bringing an application to set aside the appointment)

ADOPTION OF THE PLAN AND TERMINATION OF

BUSINESS RESCUE

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APPROVAL OF PLAN

>Plan approved on a preliminary basis if –

> supported by holders of more than 75% of the creditors’ (all creditors – secured/unsecured) voting interests that were voted (in value); and

> votes in support of proposed plan included at least 50% of independent creditors’ voting interests, if any, that were voted (independent creditors are defined as creditors who are not related to company, director or practitioner)

> “50% of the independent creditors’ voting interests” 50% of the total amount of independent creditors of the company

> alternatively, you need 25.1% to block a plan

>Shareholders vote if their rights are affected by the plan

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CONSEQUENCES OF REJECTION OF PLAN

>“New proposal” is put forward – publish a revised plan

>“Binding Offer” –

> an offer that is binding on both the offeror and the offeree - African Banking Corporation of Botswana Limited v Kariba Furniture Manufacturers (Pty) Ltd & Others 2013

> offer than is binding only on the offeror and capable of acceptance by the offeree - DH Brothers Industries (Pty) Ltd v Gribnitz NO and Others (3878/2013) [2013] ZAKZPHC 56 (21 October 2013)

> creates the necessary tension between creditors who carry the vote and the possibility of their being “bought out” at liquidation value

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CONSEQUENCES OF REJECTION OF PLAN

> “Inappropriate Vote” – practitioner or affected person if the practitioner does not, can apply to court to set aside a vote on a plan. If the court finds it reasonable and justifiable (grounds are set out in section 153(7)) taking into account –

> the interests represented by the person or persons who voted against the proposed business rescue plan;

> the provision, if any, made in the proposed business rescue plan with respect to the interests of that person or those persons; and

> a fair and reasonable estimate of the return to that person, or those persons, if the company were to be liquidated.

> Copper Sunset 220 Proprietary Limited t/a Build It Lephalale (In Business Rescue) and Spar Group and Normandien Farms Proprietary Limited (SGHC) – Makgoba J – votes on a revised business rescue plan were set aside as inappropriate by the court

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BINDING EFFECT OF A PLAN

> Section 152(4) - a business rescue plan that has been adopted is binding on the company, and on each of the creditors of the company and every holder of the company’s securities, whether or not such a person –

> was present at the meeting;

> voted in favour of the adoption of the plan; or

> in the case of creditors, had proven their claims against the company

> African Banking Corporation of Botswana Limited v Kariba Furniture Manufacturers (Pty) Ltd & Others 2013 ‐ cram down provision which has its origins in the US Bankruptcy Code of the Bankruptcy Reform Act 1978 –

> necessary for the successful implementation of a business rescue plan

> therefore, no option to set aside the plan once adopted

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DISCHARGE OF DEBTS AND CLAIMS

> A business rescue plan may provide that, if it is implemented in accordance with its terms and conditions, a creditor who has acceded to the discharge of the whole or part of a debt owing to that creditor will lose the right to enforce the relevant debt or part of it (i.e. certain creditors may be identified as retaining certain rights even after adoption of plan) (Section 154(1))

> Business rescue plan - approved and implemented - creditor is not entitled to enforce any debt owed by the company immediately before the beginning of the business rescue process, unless provided for in the business rescue plan (section 154(2)).

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TERMINATION OF BUSINESS RESCUE

> Business rescue proceedings end when –

> court –

>sets aside the resolution or order that began the business rescue proceedings; or

>converts business rescue proceedings into liquidation proceedings;

> business rescue practitioner files a notice of termination of business rescue proceedings with CIPC (Primrose Gold Mine Proprietary Limited v Werner Cawood NO & Others – 2014 (Pretoria))

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TERMINATION OF BUSINESS RESCUE

> business rescue plan has been –

>proposed and rejected and no affected person has acted to extend the proceedings in any manner contemplated by the Act; or

>adopted and the business rescue practitioner has subsequently filed a notice of substantial implementation of the plan

TRANSACTIONS IN BUSINESS RESCUE

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Commencement of Trading

Profitable Business Grows

Flat Trading Years

Approval of Business Rescue

Plan

Trade out on a

Solvent Basis

Identify Opportunity for

Post-Commencement FinanceFINANCIAL

DISTRESS

YEARS OF TRADING

Financial Distress

DISTRESSED DEBT CYCLE

Acquisition Transaction

Acquire Company

Out of Business

Rescue

Exit With Good Value

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FLOW CHART FOR THE ACQUISITION OF DISTRESSED COMPANY

Identify distressed company and/or good

value assets

Nominate Business Rescue Practitioner

Pre-Assessment of the Company – Test for Value

Offer R1 for shares and something for creditors, which would give them a better dividend than in

liquidation (i.e. an acquisition at a

significant discount)

Negotiate transaction with creditors,

employees, shareholders an the Business Rescue

Practitioner

Directors file resolution for business rescue

Consummate acquisition transaction, subject to

conditions precedent and subject to approval of

plan

Vote on plan (75% & 50%) - approve

Implement plan

Company exits from business rescue with new

owners (investors)

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PRACTICAL EXAMPLES OF BUSINESS RESCUES

> Pearl Valley Golf Estate – share sale (golf estate)

> Advanced Technologies & Engineering Proprietary Limited – share sale (aeronautical)

> B & J Meltz Proprietary Limited – share sale (retail industry)

> On Digital Media t/a Top TV – share sale (digital tv offering)

> Southgold Proprietary Limited – share sale (gold mine)

> Gootspa Proprietary Limited – share sale (Moyo restaurants)

> Econo-Heat Energy Efficient Appliances Proprietary Limited – (panel heaters)

> Ellerines Furnishers Proprietary Limited – furniture stores

THANK YOU5 November 2014

Legal notice: Nothing in this presentation should be construed as formal legal advice from any lawyer or this firm. Readers are advised to consult professional legal advisors for guidance on legislation which may affect their businesses.

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