Can embattled SA Airways actually be rescued?
This is the first thing that the appointed business rescue practitioner will have to evaluate, said Nicholas Potgieter, a director at Fluxmans Attorneys, in the wake of an announcement about the fate of the national carrier on Wednesday night.
The airline’s board of directors adopted a resolution to place the company under business rescue, hoping to facilitate the rehabilitation of the “financially distressed” company.
The Companies Act describes a financially distressed firm as one which appears likely to be insolvent within six months.
In a statement on Thursday, public enterprises minister Pravin Gordhan said the board’s decision was supported by the government.
Fluxmans Attorneys director Ryszard Lisinski said the aim of business rescue was to ensure that a company continued as a going concern.
Business rescue, as defined by the Companies Act of 2008, states that the process involves providing for the temporary supervision of the company and management of its affairs, business and property by a business rescue practitioner. It also provides for a temporary moratorium on the rights of claimants against the company, or in respect of property in its possession.
There is also the development and implementation – if approved – of a business rescue plan to rescue the company by restructuring its business, property, debt, affairs, other liabilities and equity.
Potgieter told TimesLIVE that the first task was to test whether there was a chance that the company could be rescued.
He said there were two ways in which a company could be placed under business rescue.
“A board of directors may sign a resolution to place the company under business rescue proceedings, or through a court application.
“Once a resolution is signed, there are prescribed time limits in the Companies Act to identify the business rescue practitioner and to appoint the practitioner,” he said.
The business rescue practitioner had to determine what he or she could do to save costs.
Lisinski said the board, executive and shareholder would cease to to have control once the practitioner was appointed.
The business rescue practitioner had to look at operational and financial restructuring.
“On the financial side, there are huge loan agreements and the business rescue practitioner can assess if these can be restructured or renegotiate better repayment terms.
“On the operational side, the practitioner can look at matters such as cutting overheads, employees or third-party contracts,” Lisinski said.
He said in terms of the Companies Act, employees remain employed during business rescue.
In a statement on Thursday, SAA said the board’s unanimous decision to place it into business rescue was to create a better return for the company’s creditors and shareholders, than would result from any other available solution.
Trade union Solidarity, which had previously gone to court to get SAA placed under business rescue, said the government’s decision meant its case falls away. The union brought the application last month and SAA filed a notice last week to oppose it.
Solidarity CEO Dirk Hermann, however, wasn’t entirely happy. He said it was worrying that SAA, by placing the company under business rescue, wanted to have control over the process.
“This is going to fail. Solidarity will request the other unions to jointly demand that organised labour should have an influence in the appointment of the business rescue practitioner,” he said.