WELCOME TO BR360
A corporate consulting firm, specialising in the rehabilitation, restructuring and/ or rescue of ailing businesses. Whether in financial distress or simply needing help with a creditor resolution process, look no further for a wealth of experience and knowledgeable assistance.
WHY BR360
OUR MANTRA
Rehabilitation, Restructuring, and business Rescue can be used to address numerous forms of distress – most commonly financial – but also other forms of distress such as legacy, structure and hierarchy.
OUR VISION
BR360 strives to be the pre-eminent choice for restructuring and/or rehabilitating distressed businesses in the next 18 months, while still maintaining our success rate and reputation.
OUR MISSION
Contributing to the South African economy by simply doing what we do best, saving businesses, saving jobs, and providing the best possible outcome to all affected.
SERVICES OFFERED BY BR360
- Rehabilitation
- Chief Restructuring Officer projects (CRO)
- Informal turnarounds (section 155)
- Step-in projects
- Restructuring
- Financial restructuring
- Mergers and acquisitions
- Exit strategies
- Business Rescue in terms of Chapter 6
- Debtor or creditor initiated
- Creditor assistance in navigating process
- Structured wind-down
OUR 360 APPROACH
When it comes to helping a business in distress, whether as a result of its own internal inefficiencies, or as a result of external matters beyond their control, we can help.
From our sound decision-making process and giving you all the available options, to the actual implementation of a turnaround strategy or business rescue plan, we can help.
If you’re a creditor facing non-payment from a customer in business rescue or liquidation, we can help.
We do so with a hands-on approach, a qualified team and with our client’s best interests at the very centre of our approach. Whether from a creditor or debtor perspective, we can help in all aspects of rehabilitation.
JUDGE
ELOFF
THE PROCESS
The three R’s are all processes that can help companies improve their operations in order to improve financial performance. However, there are some key differences between the three processes.
The role of Rehabilitation
REHABILITATION is a process in which a company attempts to address certain historical inefficiencies that have either crept in over time or materialised as a result of changes; and/or the environment it operates in; complacency; internal differences of opinion/strategy; lack of standardisation, outdated systems and processes; or simply poor management practises.
As with any of our processes, the first step is identification, and this is where our proprietary business health check provides us with a competitive advantage. Our system enables us to quickly identify areas of possible improvement, allowing us to address these areas timeously and effectively.
From the South Gauteng High Court:
Areas of improvement most commonly include:
- Legacy – what has always worked is now outdated and needs to be replaced.
- Product profitability – analysis may identify direct or indirect loss makers, that are not easily identifiable from financials alone.
- Poor management practices – this could include lack of clear communication, poor decision-making, or lack of accountability, resulting in inefficiencies and low employee morale.
- Market positioning – the company may be facing intense competition, or unplanned market changes of reverse economies of scale.
- New technologies – the company many not be using up-to-date technology, which can make it difficult to compete and adapt in the market.
- Human Resources issues – these could result in a lack of skilled workforce, or poor employee morale stemming from overly robust or too lenient a management style; or simply as a result of the company’s inability to adapt to an ever-changing employment landscape.
- Financial problems – these could result in high debt, low profitability, or cash flow issues, which can hinder the ability to operate and grow.
Rehabilitation typically involves a thorough investigation of the company’s current operations in addition to most recent changes. This gets done through the lens of the industry it operates in and historical outcomes versus future desired outcomes.
The role of Corporate Restructuring
CORPORATE RESTRUCTURING is the process of the deliberate reorganizing of a company’s internal structure, operations, ownership, or combination thereof. It’s done to improve the company’s performance, operational efficiency, to unlock value, or to adapt to changes in the market or industry.
This can include changes such as downsizing, divestitures, mergers, acquisitions, expansion and/or changes to the company’s management structure or ownership.
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Organizational re-design – facilitating the formalisation of a structure and hierarchy within a company to realign the company and its key stakeholders with updated goals and objectives. |
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Leadership development – identifying, training, and developing current and / or future leaders within a company to help drive its updated goals and objectives. |
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Operations management restructure – managing, measuring and adapting the day-to-day operations of the company to ensure efficiency and effectiveness. |
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Cost management – identifying and reducing unnecessary costs within a company to improve its bottom line, without inhibiting its operations. This process also identifies areas where the business should invest or even re-invest capital to secure future profitability. |
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Talent management – identifying, recruiting, developing, and retaining top talent within a company. Often top management needs to be replaced in a very short period of time, necessitating the employment of interim directors or other key staff members. |
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Process improvement – identifying and removing inefficient or ineffective processes within a company to increase efficiency, productivity and ultimately profit. |
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Performance management – measuring, evaluating, and improving the performance of processes, employees and / or teams within a company. |
Restructuring is typically a more formal process than rehabilitation, and while it may resort to the involvement of a court or other third party, it remains a more confidential process than business rescue.
The role of business rescue
BUSINESS RESCUE is the formal and legal process, as contained in Chapter 6 of the Companies Act, for the rehabilitation of a financially distressed business.
Business Rescue is a process geared towards the rehabilitation of a business in financial distress. The process of Business Rescue provides for the temporary supervision of the business in order to restructure it in a way that is beneficial to all affected persons, but at a minimum, securing a better outcome than that of an immediate and traditional liquidation.
“The aim of business rescue is to restructure the affairs of a company in such a way that either maximises the likelihood of the company continuing in existence on a solvent basis or results in a better return for the creditors of the company than would ordinarily result from the liquidation of the company (section 128(1)(b)(iii)).”
Business Rescue is a process introduced by Chapter 6 of the Companies Act of 2008, and its aim is clearly stated in Section 128 (1)(b)(iii) of the Act. Its definition is made up of two parts:
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The first part of the definition of Business Rescue states that it is a process designed to rehabilitate financially distressed companies. |
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The second part of the definition is that if a turnaround of the Business is not possible, that the Business Rescue process must provide a better return to creditors and shareholders than what would be realised through the immediate and traditional liquidation of the Business. This is done via a temporary supervision of the Business by a Business Rescue Practitioner, where this practitioner must determine the exact financial position of the Business and prepare a Proposed Business Rescue Plan which creditors will ultimately vote on. |
For a Business to qualify for Business Rescue, it needs to meet two requirements stipulated in as Section 129 (1) of the Act.
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The first requirement is that the Business must be financially distressed as defined in Section 129 (1)(a) of the Act. |
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The second requirement is that the Business Rescue Practitioner must be of the opinion that a reasonable prospect of a rescue exists as defined in Section 129 (1)(b) of the Act, alternatively the practitioner must be in a position to provide a better outcome to the creditors and affected persons than what would be realized in a liquidation scenario. |
Although Business Rescue is never a first choice, it remains a powerful tool to any business owner or director in South Africa. Understanding business rescue and ensuring that you have the correct practitioner on board is vital to the success of any Business Rescue engagement.
Tools of a Business Rescue practitioner
Chapter 6 allows for several tools that the Business Rescue Practitioner or (BRP) can use to achieve a successful rehabilitation of the company in financial distress. These include:
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Moratorium on all legal proceedings – Section 133 of the Companies Act makes provision for a general moratorium on all legal proceedings against the company. This means that during business rescue proceedings, no legal proceedings may be commenced or proceeded with against the company. This protection gives much needed breathing space to assess the business holistically, and to focus the attention of the management team and the business rescue team on what’s needed to ensure a successful business rescue intervention. |
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Release from debt – Section 151 of the Companies Act makes provision for a Business Rescue Practitioner to include in the business rescue plan an offer as full and final settlement to creditors. This includes either a compromise relating to Cents in the Rand with immediate payment or a repayment over an extended period of time, or a combination of a compromise over an extended repayment period. |
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Suspension of contracts – The Companies Act makes provision in Section 136 that the Business Rescue Practitioner may suspend certain contracts that the business is party to, either partially or in full. This is done only for the duration of the business rescue proceedings. This section was included to assist the business to suspend contracts that negatively affect the business, and which would not be able to be suspended under normal trading conditions. However, to have a contract completely cancelled, the BRP must apply to court for an order to cancel the contract where it is not beneficial to the company. The only exception to this section is employment contracts, which may not be cancelled except in terms of the Labour Relations Act sections 189 and 189A. |
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Opportunity to re-structure – The process of business rescue gives the Business Rescue Practitioner and existing management the opportunity to restructure the affairs of the business in order to improve its operations, and ultimately, profitability and future prospects. The overall aim of business rescue is to save jobs, but the rights of all affected persons must be balanced. |
The Team
Business Rescue 360 is able to offer an all- round, problem-solving and solution- based approach because of the team at its core. Business rescue depends on connecting a wide range of talent and experience as well as legal and financial skills to both plan and execute successful outcomes.
It is this wide diversity of knowledge, plus the proven ability to arrive at workable solutions in difficult, high pressure situations that allows us to define what needs to be done, and as quickly as possible.
DAVID MASTERTON | DIRECTOR
BCompt (Hons) CA (SA) CFE MDP B‑BBEE
David is a Chartered Accountant with extensive knowledge of a broad spectrum of advisory roles.
In his 8 years career with SAPPI as Commercial Manager, he built valuable experience of supply chain management, work flow and system implementation.
David joined Nolands in 2013 in that time has assumed leadership in several aspects of the company’s business, including advising clients on BBEEE strategy, re-structure, M&A and in identifying opportunities and initiating start-ups.
WALTER GEACH | CHAIRMAN
BA LLB (UCT) MCom FCIS CA (SA)
Prof Walter Geach is uniquely qualified and experienced in the fields of trusts, taxation and estate planning. He is a chartered accountant CA (SA), an admitted advocate of the High Court and former Head of the Department of Accounting at UWC. Among his many other academic achievements, he has also authored/co-authored over 15 published books which have become go-to reference works in the industry. He is a director (non-exec) on several boards, including Grand Parade Investments Ltd.
PAT PATTINSON | BUSINESS RESCUE PRACTITIONER
Since 2011, Pat has been appointed to more than 50 formal businesses rescue assignments in various industries throughout South Africa. He has achieved an outstanding success rate of more than 90% on published business rescue plans.
In December 2015 he was officially promoted to a Senior Business Rescue Practitioner and at the end of 2018 was accredited as a Professional Turnaround Practitioner SA (PTP-SA SAQA)He is currently the COO of the Turnaround Management Association of South Africa (TMA-SA).
He has broad experience in business, finance and law.
BR360 CASE STUDIES
The reasons why any business can become distressed to a point where rescue is needed are many and varied.
That said, there are also many recurring themes which often plot the arc from start-up to momentum to success and then a plateau from which a business either takes timely remedial action or continues a downward spiral.
AUDIO VISION GROUP OF COMPANIES
Retail; Western Cape; Annual Turnover R70 million
The business rescue proceedings were launched via court application on 26 July 2013. The Companies were placed under business rescue and supervision in terms of the Court Order. The Companies had stores in the Canal Walk Shopping Centre, Tyger Valley Centre and Victoria & Alfred Waterfront.
The Companies employed 57 employees in total consisting of sales people, administrative staff, logistic staff, instillation teams and management. The Group of Companies are specialist consumer electronics stores that handles a variety of product categories from basic audio visual equipment and accessories to full scale home installation and theatres.
The reasons for the failure of the Companies were as follows:
The Companies had to meet more stringent requirements as a Samsung partner, by issuing an 8 week forecast for all Samsung stock required, over and above the current months’ stock deliveries. This became a financial problem as their main supplier and thus creditor, Group Appliance, had to issue order numbers for the stock on forecast, effectively buying 2 months’ worth of stock in advance.
Subsequent to the appointment of the BRPs the major supplier agreed to maintain supply, post-commencement in an attempt to raise the stock levels which in turn would increase the gross turnover for the benefit of creditors. An amount of R3 million was afforded by the supplier that effectively raised the turnover during the first trading month by more than R1 million. The creditors approved the business rescue plans that included the following:
All employees to be retained.
A compromise was reached in the amount of 28,2c/R1.
The Companies continued to trade and the suppliers were afforded an opportunity to continue with their relationship with the Companies
The assignments only lasted 4,5 months where after the Companies continued with its trading activities.
DFC GROUP OF COMPANIES
Agriculture and Retail; Western Cape; Annual Turnover R160 million
This Group of Companies consisted of 5 entities being the Hatchery, Breeder, Broiler, Abattoir and Holdings Company. This assignment commenced via Special Resolution during February 2012.
Due to the economic downturn the Groups’ prospects to continue trading were severely hampered. The combination of escalating input costs, specifically maize and fuel placed the Group under severe cash flow pressure. The price of packaged chicken products did not follow the same pattern of increase as inputs and this, coupled with a strike during the latter part of 2011, took its toll on the trading activities of the Group.
The major secured creditor agreed to supply post commencement finance for the ongoing trading activities. The post commencement finance afforded the BRP an opportunity to ensure a better exit route for creditors than liquidation. The secured creditor, with an exposure of circa R125 million, was at risk to lose at least R75 million should the BRP not create value within the business rescue process. The Companies were ultimately sold to a listed company which had the following effect on the affected persons:
The purchaser agreed to retain the services of 40 % of the 500 staff members.
The concurrent creditors that would have received no dividend under liquidation circumstances received a dividend as part of a compromise that were reached with them.
The secured creditor was paid in full.
The business rescue process lasted more than 2 years.
CAPRICORN COLD STORAGE (PTY) LTD
Logistics / Cold Store; Western Cape; Annual Turnover R50 million
The Company commenced business rescue proceedings in terms of Section 131 of the Companies Act placing the Company under supervision on 19 November 2014. The Company conducted the business of a customs bond store, cold store and warehouse as well as a customs-clearing agent. It was also involved in transport and logistics. It had 26 full time employees.
The financial position of the Company was attributed to a deed of surety in favour of Standard Bank for the debts of a Company named Muizenberg Import Export and Distribution (Pty) Ltd (“Muizenberg Import”). This company was provisionally liquidated on 19 June 2014 at the instance of a Company, Ry and Kuang PTE Limited.
The indebtedness of Muizenberg Import towards Standard Bank amounted to R14,640,128.00. Therefore, under the suretyship, the Company was indebted to Standard Bank in a similar amount. Due to the liquidation of Muizenberg Import, Standard Bank has called up the suretyship.
From our preliminary investigations and the historic trading figures at hand, we had come to the conclusion that some or all of the assets vesting in the Company had to be disposed of in order to settle the claims of the Creditors. In order to realize the best value, the assets had to be disposed of as a going concern or under controlled circumstances. The BRP secured post commencement finance from a related company that afforded him the opportunity to create value within the process. The creditors sanctioned the business rescue plan that resulted in the following:
All independent creditors’ claims were settled in full.
All employees retained their employment.
The continuation of business activities on a reduced scale.
The business rescue process lasted 7 months.
ENGENIUS TOYS FOURWAYS (PTY) LTD – Retail
Gauteng/Western Cape; Annual Turnover R12 million
The Company commenced business rescue proceedings via Court application on 18 September 2012. The Company conducted business as a retailer of Lego retail products, Lego educational products, Lego licenced products and Lego Wear Clothing. The Company had 11 full time employees.
The business lost monies due to a poor decision to open in the Centurion Mall which was trading at a loss of approximately R200,000.00 per month. After closing this store in July 2012, the Company had to cover the costs of closing this business as well as buying itself out of a lease. This loss was estimated to be in the region of R900,000.00. Due to the lack of finance, the shareholders agreed to source funds from other investors. A further reason for the Company being in financial distress was a lack in decision making by the shareholders due to various disputes among them.
The BRP secured post commencement finance from a related company that afforded him the opportunity to create value within the process. The business rescue plan was initially not sanctioned by the creditors but after subsequent negotiations, the business could continue with its trading activities.
All employees retained their employment.
All independent creditors’ claims were settled.
The Company continued with its trading activities.
The business rescue process lasted 5 months.
JATAN 002 BK TRADING AS NETWERK KOERIERS
Courier Service; Western Cape / Northern Cape / Eastern Cape; Annual Turnover R50 million
The Corporation commenced business rescue proceedings via Special Resolution on 24 February 2014. The Corporation offered overnight courier services in the Northern Cape, Southern Cape, Eastern Cape and Western Cape Provinces. Through their 44 depots they were able to render outstanding services at competitive prices. The Corporation had 31 salaried employees, 25 waged employees and 15 sub-contractors that were reliant on the existence of the business for their livelihood.
The main reason for the failure of this entity was substantial debit loans by the members. During the business rescue process these loans were recovered in part and is this process still ongoing. The business was sold to management (excluding the members) for substantially more than the forced sale valuation. The effects of the approved business rescue plan were as follows:
All the employees’ contracts were transferred to the successful bidder.
Creditors received a dividend of at least 75c/R1 of which the majority has already been distributed.
The business continued.
The outcome of this assignment was substantially better than liquidation as all the employees retained their employment, creditors received in excess of 75c/R1 and the business continues to operate.
JONKHEER GROUP OF COMPANIES
Retail; Western Cape / Northern Cape; Turnover R70 million
The Companies commenced business rescue proceedings via Special Resolution on 27 August 2013. These Companies were wholesale wine and liquor concerns, focussing on servicing the Southern Cape and Karoo areas. Due to many changes in the market, rising costs of labour and debtors’ policy of some of the larger retail groups, the Companies incurred severe cash flow problems.
The Companies supplied liquor to various clients including but not limited to Pick ‘n Pay and Makro. The Companies had 90 salaried and waged employees.
No post commencement finance were required on these assignments. The creditors approved the business rescue plans and it was agreed that business rescue should endeavour to create a better exit route than would be the case under liquidation circumstances. The effects of the approved business rescue plans are:
All employees were transferred to the successful bidder.
The sale of the assets of this Company generated circa R15 million, more than would have been the case under liquidation circumstances.
Creditors received 86c/R1.
Jonkheer Finansieringsmaatskappy
All creditors settled in full.
CONTACT US
If you believe it to be in your company’s best interest to explore any aspect of the topics raised here, we invite you to get in touch with David Masterton for a completely confidential chat, without any obligation whatsoever. His contact details are on the right.
Alternatively use the messaging form below and we will get back to you.