Advice and Opinion

Landlords need to prepare for business rescue

Micarle van Heerden, Gillan and Veldhuizen Incorporated.
Micarle van Heerden, Gillan and Veldhuizen Incorporated.

“Landlords should make certain that they are prepared for and consider the consequences of a business rescue before being advised that their tenant has entered the process”. That’s according to Justin Gordon, business rescue practitioner at Hobbs Sinclair.

Business rescue was introduced as an alternative to liquidation via Section 6 of The Companies Act in 2011 in an attempt to rescue companies and promote relief to distressed companies. The appointed business rescue practitioner takes effective control of the financially stressed companies and is accordingly tasked with the turnaround of the business.

Once under business rescue there is a moratorium against legal action in terms of Section 133 of The Companies Act, whereby no legal action may be brought against the company under rescue, allowing for ‘breathing space’ for the stressed company.

Considering the legal moratorium and that a tenant can voluntarily enter business rescue within a few days it is important that the landlords review their lease agreements to ensure that they are in line with current case law. This review should be performed in conjunction with a legal firm that is well versed in both business rescue and commercial drafting and advice.

Attorney Micarle van Heerden of Gillan and Veldhuizen Incorporated, who counsel Hobbs Sinclair on many business rescue cases, advises that landlords should review their leases and respective agreements before their tenant engages in business rescue so as to protect themselves from the repercussions of this process.

“If a landlord already finds themselves in a position where their tenant has entered business rescue then a business rescue practitioner should be contacted immediately to assist and advise the landlord of their rights throughout the process”.