By: Alastair Macduff
Managing a business in today’s uncertain socio-economic conditions is not without its challenges.
The emergence of more agile competitors, increasingly fickle customers, and global pressures, mean decision-makers must keep innovating while still delivering stakeholder value.
Some have turned to business coaches and financial advisors to provide guidance on getting through a ‘rough patch’. And with recent media reports filled with examples of well-known brands on the verge of bankruptcy, business rescue is becoming a more common occurrence. In this, a specialist advisor assists to develop and implement a business rescue, or turnaround, plan to give an organisation the strategy, focus and momentum it needs to survive and prosper.
Unfortunately, until recently, the lack of a professional body guiding business rescue and turnaround practitioners to ensure that they conform to the legislative requirements and maintain an ethical approach, resulted in a ‘wild west’ situation developing within the industry. The reality is that there are more than a few unscrupulous service providers out there trying to benefit from the misfortune of others … So, what can the profession do to regain control and help organisations on the road to recovery?
In October last year, the CIPC started to enforce the legislative requirement that business rescue professionals have to be registered with an accredited professional body. These professional bodies include the Turnaround Management Association of SA (TMA-SA), the Law Society of SA, the SA Restructuring and Insolvency Practitioners Association (SARIPA), the Chartered Institute of Management Accountants (CIMA), and the SA Institute of Chartered Accounts (SAICA) to name but a few.
Given that business rescue was introduced as an alternative to insolvency via Chapter 6 in the Companies Act of 2008, it is vital that turnaround professionals in South Africa adhere to global best practice and conduct themselves accordingly.
The importance of ‘professionalising’ the industry can be seen in the dispute currently before the Constitutional Court between a business rescue practitioner and the liquidators of a company that was in business rescue.
The dispute pertains to the crucial issue of the ranking of unpaid fees and expenses of the practitioner as well as the commencement date of liquidation of a company that was in rescue and the role of the practitioner during the interim period.
Several Friends of the Court have provided submissions, including TMA-SA, to represent and advance the interests of business rescue practitioners. The case was heard by the Supreme Court of Appeal in November last year and the matter is now on appeal before the Constitutional Court, and is to be heard in September this year.
Turnaround practitioners, and business rescue practitioners, will now need to be accredited with a professional body such as the TMA-SA. Having a professional body provide oversight means that parties involved in a turnaround or business rescue now have more immediate recourse should a dispute arise.
In addition, companies that need to employ a turnaround professional can look for a practitioner with the appropriate level of skills and experience within a particular sector that is relevant to their particular requirements.
Having turnaround professionals and business rescue practitioners accredited with a professional body such as the TMA-SA will help to ensure that the services provided are professional and credible. The foundation has been set and it is now up to the practitioners to lead the charge.
Alastair Macduff is the Chairman and Chief Executive Officer of the Turnaround Management Association – Southern Africa (TMA-SA).