Business rescue: How can its success be evaluated at company level?

Abstract

The question of what constitutes a successful business rescue is a very topical and unanswered one. Reports on success are contradictory and seem to lack a set of standardised evaluation criteria. The purpose of this article is to investigate how business rescue success is evaluated internationally in order to develop a set of criteria that can be used to evaluate business rescue success at company level in South Africa. A comparative review approach was used to investigate data from four leading international countries with similar business rescue regimes. A number of evaluation criteria were identified and aligned with the business rescue legislation as set out in Chapter 6 of the South African Companies Act. The fi ndings indicated that the international business rescue regimes and Chapter 6 share similar goals. Several criteria for evaluating success were identifi ed, the key indicators being the going concern status on exiting business rescue, and whether the return to creditors was maximised as opposed to liquidation. It was further found that an initial exit as a going concern may be a short-term success indicator. Success can ultimately only be established if further investigation after some time period indicates no re-filing for business rescue.

Key words: business rescue, South African Companies Act, success, evaluation, going concern, liquidation, stakeholders, restructuring