The current state of our economy and the world has caused much despair and uncertainty amongst companies. Many companies have been placed under immense financial distress and this in turn affects its employees. As such, a number of businesses have been placed under business rescue to recover from the economic implications of Covid-19. This leaves affected parties with many unanswered questions. Some of which are dealt with below.

What happens to a company when the company is placed under Business Rescue?

To begin with, a company is placed under business rescue when it is financially unable to fulfill its obligations. As such, a Business Rescue Practitioner (BRP) is elected with the purpose of rearranging the business so that it becomes profitable once more. The BRP must be a person who is duly qualified to perform the function.

During the financial rescue of your business, your creditors may not institute legal action against the business until business rescue proceedings are completed.

What happens to the employees of a company undergoing Business Rescue?

The law protects employees and requires that employees should still receive their normal salaries and they, in turn, will also be required to continue with their usual job requirements.

Oftentimes, after companies begin business rescue proceedings they are not able to pay their employees what is due. In these circumstances, employees will be seen as creditors of the company and will then have claims against the company.

In the event that the employer or BRP elects to change the terms of the employee’s contract in order to restructure the businesses finances, the employee will be able to redress this as per the usual protections afforded to employees in terms of our labour law. What is important is that employers/ BRP’s are required to communicate any changes to employment terms or conditions, needed to stabilize the company’s financial standing, to its employees.

Where a company is forced to terminate its employees, the process regulating dismissals is governed as per the usual labour laws surrounding retrenchments and the like to ensure fairness.

Of course, this is not always the case and should you have any concerns relating to the above issues feel free to contact Tuckers on 011 897 1900, 076 777 1920 or info@tuckers.co.za.

Article contributed by Ra’eesah Akoon of Tuckers Attorneys.