When a company is in dire financial straits, a creditor may consider placing the company either in liquidation or under business rescue. But what does this entail?
With business rescue, the company must be financially distressed to such an extent that a third-party intervention is necessary and, if managed properly, it will be able to trade out of its poor financial position. A business rescue practitioner will be appointed who will act in accordance with an approved business rescue plan with the main purpose of rescuing the company and to preserve its existence.
With liquidation, however, the company must be either factually or commercially insolvent. Once liquidated, a liquidator will be appointed to liquidate the company’s assets and to distribute the proceeds amongst proven creditors with the purpose of winding up the company and bringing an end to its existence.
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