Page 16 - University of Pretoria RESEARCH REVIEW 2016
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DEVELOPMENT and the economy
 BUSINESS RESCUE
THE IDEA OF REASONABLE PROSPECT
In line with international regulation practices, the South Africa’s Companies Act 71 of 2008 came into effect in 2011. One of the purposes of Chapter 6 of the Act is ‘to provide for the efficient rescue and recovery of financially distressed companies, in a manner that balances the rights and interests of all relevant stakeholders’.1
 The central point in the implementation of a new Business Rescue (BR) regime and the related regulation is to promote the development of South Africa’s economy.
Professor Marius Pretorius in the Department of Business Management at UP has been investigating the success, or not, of different aspects of
the new BR regime. Widely recognised as an expert researcher in business rescue, he is often called upon for
advice and also provides guidance to the Regulator. Pretorius and his colleagues, including postgraduate students, have published on tasks, competencies, rescue plans, reasonable prospect, post-mortem analysis, post-commencement finance, and more. However, his research is both practical and intended to be useful, and not merely an academic exercise. In support of the new legislative framework, the Department offers a Certified Rescue Analyst
(CRA) training programme for Business Rescue Practitioners (BRPs) and short courses through Enterprises@UP. The main aim is to prepare BRPs in decision-making and executing complex problem solving.
In 2016, Professor Pretorius completed a detailed study for the Companies and Intellectual Property Commission (CIPC) of the Department of Trade and Industry (dti) on the status of business rescue proceedings in South Africa. The study revealed
1 http://www.justice.gov.za/legislation/acts/2008–071amended.pdf
several shortcomings in the regime. For example, the generic determination of ‘reasonable prospect’ was identified as a key determinant of conflict
and uncertainty. Pretorius notes that reasonable prospect is not ‘due diligence’, and that it remains largely a vague concept in business rescue. One of the reasons for this state of affairs is that in the early stages where reasonable prospect determination
is required, decisions often hinge on incomplete information and, in some cases, the lack of data integrity.
The importance of reasonable prospect, and its role in business rescue, has only more recently started to become clear through academic research and the analyses of BRP techniques and case judgements. While some tools exist within
the industry to determine the factual status of reasonable prospect, BRPs see data generated in the process of undertaking specific cases as their ‘intellectual property’, and therefore the knowledge and understanding gleaned are not widely available for scrutiny.
A further shortcoming identified in the successful implementation of the new legislation relates to
the role, competencies and accountability of BRPs. Pretorius writes that the causality of business decline has been the topic of research for many decades, with reasons grouped in two main categories: strategic and operational. It is crucial that BRPs have the competencies to make sense of what the best future alternative for a business is, and have the skills to successfully navigate the business out of its decline.
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