Is post-commencement finance proving to be the thorn in the side of business rescue proceedings under the 2008 Companies Act?

Abstract

With the onset of the new corporate rescue regime in South Africa, the impact of the current post commencement finance culture in the country could have adverse effects on such proceedings. Due to the growing number of financially distressed entities, this topic, and in particular, turnaround funding in developing countries like South Africa is becoming more and more relevant. Due to the juvenility of the current legislation regarding business rescue proceedings, there are still issues that need addressing. One of the major stumbling blocks of these proceedings stems from a lack of post commencement finance. In comparison to other, more established jurisdictions, South Africa seems to be behind in the commercial rescue realm. Thus, an evaluation of post commencement financing in South Africa is critical in order to determine whether the relationship is positive or negative in terms of the actual proceedings themselves. By way of normative methodology this paper will describe the magnitude of post commencement finance in South Africa as well as address the reasons for the situation this country finds itself in. Finally an attempt will be made to show the best way(s) in which to go about creating a culture within the economy that is partial to participation in the rehabilitation of distressed institutions. To this end, it appears from the literature and studies undertaken that the post commencement finance environment is lacking essential components. Through time, the development and refinement of these applicable provisions and influential factors will enable the corporate landscape to evolve into a competent dwelling for companies facing financial woes.