As the uncertainty of businesses’ futures continue during Covid-19, Printing SA has steered its members in the direction of the COVID Business Rescue Assistance (COBRA) – a pro bono service to businesses within South Africa that are in distress to co-ordinate bank, government and stakeholder support through a structured business rescue process. For the most part, the service is pro bono, depending on the company’s financial situation, which COBRA will assess first.
COBRA is the result of the combined efforts of Schindler’s Attorneys, Engaged Business Turnaround and IQ Business. Printing SA has partnered with COBRA to offer solutions to its members that would assist those in distress during this period. This initiative has been undertaken in order to continue to offer other services that are unique to the current situation that Printing SA would not normally offer.
A webinar was held on 7 May by COBRA representatives and outlined the following:
Most businesses do qualify for COBRA’s pro bono services. For the most part, COBRA aims to avoid business rescue. Many businesses are in different and unique situations, and so it is important for a company to receive consultation, where a plan can be tailored according to that company’s background. For example, companies such as South African Airways, Comair and Caxton have been affected badly, but for different reasons, such as corruption, Covid-19 and current market conditions.
What also transpired during the webinar was that creditors are more forgiving if companies have undertaken steps to devise a plan should they face the possibility of going into liquidation. Factors such as reckless trading should be avoided, and those considering business rescue – especially small to medium businesses – should always consult a practitioner with a strong business background. All in all, it is better to act now rather than later.
Financial distress is determined when a company is not able to pay liabilities due in the next six months, or when a company’s liabilities exceeds its assets. If the practitioner doesn’t believe a business can be rescued, liquidation will be advised. It is critical to get creditors on board with you, so work together.
Once a plan is drafted, it must be put to a vote with all key players. A company’s directors have an obligation to put business rescue to a vote, and if they say no, they have to give reason. The practitioner will explain the ramifications of the plan, and will explain what is in the best interest of all creditors. The creditors are bound by terms and conditions once the plan is approved. The practitioner will always advise on the best plan.