The naked truth: creditor understanding of Business Rescue: A Small Business perspective

Abstract

Purpose: to study the level of knowledge and awareness of business rescue of entrepreneurs who are potential creditors of businesses filing for rescue, and to identify the major issues and concerns from the creditors’ point of view.

Methodology: the design of the study was a survey to examine the level of knowledge, awareness and experience of Chapter 6 of The South African Companies Act No. 71 of 2008 and to seek to describe the status from a creditor’s perspective.

Findings: The literature revealed the role that creditors have to play in the business rescue process. It indicated the potential for creditors to emerge with a better return than the one that liquidation would offer. The primary data demonstrated that the respondents’ level of knowledge and awareness of and about rescue and the roles and powers associated with the Companies Act is extremely low and of grave concern to the industry.

Practical Implications: there is a large gap between the level of knowledge available and what is actually known. The result is entrepreneurs who do not comprehend the significance of this legislation and its potential consequences for their business.

Originality: this paper addresses the limited research available on business rescue issues. Due to the newness of the Act, sparse case law exists and little scientific research data is available.

Key words: Companies Act, business rescue, creditors, knowledge, awareness