The struggling South African economy may lead to a higher number of companies falling into financial distress and having to apply for business rescue, a daunting outlook given the fact that in South Africa it can take up to three months before the matter comes before a court.
Calls for specialist courts with the necessary knowledge and experience to deal with the matters within the prescribed timeframe have increased in recent times.
No speedy remedy
The concept of business rescue was introduced through the Companies Act in 2011. The process requires that a business rescue plan is implemented within 90 days from the time the company has filed its notice to commence with business rescue.
Faith Ngwenya, Technical and Standards Executive at the South African Institute of Professional Accountants (SAIPA), says this is for all practical purposes impossible to achieve given the current delays. “The urgency to have specialist courts that can deal with the matters efficiently and quickly has never been so great,” she adds.
The main aim with the process is to reduce the number of companies which goes into final liquidation. Business rescue can be initiated by an application to court when the business is financially distressed.
However, in many instances the application is only heard three months after the notice was filed. Business rescue cases are not prioritised by the courts.
Ngwenya says statistics provided by the Companies and Intellectual Property Commission (CIPC) demonstrate that in 78% of the cases it took more than six months for the “substantial implementation” of proceedings.
She says during a business rescue process the business is protected from any action that can be taken by the creditors and the company is allowed to operate under the supervision of a business rescue practitioner. However, lengthy delays in the process increase the risk of additional liabilities for the company and the potential of greater financial losses for creditors.
According to CIPC statistics the industries with the greatest number of business rescue proceedings include retail (vehicle repairs), information and communication, and construction.
Ngwenya says courts needs specialist skills to deal with the complexities of the Companies Act and the business rescue process.
“Business rescue is fairly new in South Africa, and although one can argue that a judge or a magistrate will use his professional judgement to take the correct decision, one has to acknowledge that these are not cases they deal with on a daily basis.”
The Department of Trade and Industry is the custodian of the Companies Act and CIPC is the implementer of the act.
“There needs to be an agreement between the Department of Trade and Industry and the Department of Justice that this (the establishment of specialist courts) need the priority it deserves.”
CIPC has accredited SAIPA to regulate its members that are eligible to be business rescue practitioners in October last year.
The move to hand over the administration and monitoring of business rescue practitioners to professional bodies like SAIPA will clearly lift CIPC’s burden, says Ngwenya. It may even open the debate on the need to increase efficiency in the process by introducing courts that can exclusively deal with business rescue.
MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, firstname.lastname@example.org, www.atthatpoint.co.za
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The South African Institute of Professional Accountants (SAIPA) says some of the amendments of the draft Tax Administration Laws Amendment Bill will have a direct impact on the tax practitioners, particularly small and medium-sized enterprises (SMEs), who need to be in a position to respond effectively through professional development.
Faith Ngwenya, Technical Executive at SAIPA, believes it is critical that any practitioner keeps both skills and knowledge up to date to ensure relevance and ability.
“These regulatory changes are one of many challenges facing the tax industry and the professionals in the field. Any credible tax professional has to be aware of what is happening in the industry and needs to understand the trends and challenges which could impact the way they work and we see it as our role as SAIPA to empower practitioners with this cutting edge analysis,” Ngwenya emphasises.
Currently the proposed amendments to the Bill are particularly relevant to the tax practitioner, especially for those who work within the SME sector. The proposed inclusion of personal liabilities companies into the small business corporation section of the Act will have a marked impact on the industry.
The Companies Act 71 of 2008 replaced the incorporated companies (Inc) with personal liability companies and Section 1 of the Companies Act defined a private company as a profit company that is not a public, personal liability or state owned company.
The exclusion of the personal liability company in the definition of a private company resulted in its exclusion from the income list of entities included in the definition of Small Business Corporation Tax, explains Ngwenya. “This has negatively impacted the many small businesses registered as personal liability entities from benefitting from the SME favourable provisions of the Small Business Corporations.”
SAIPA is working with the government and proposing that personal liabilities companies be included on the SBC list and further motivating for National Treasury to consider backdating the proposed change to the inception of the Act. This is but one of the topics that will be discussed at the upcoming Tax Indaba.
The Tax Indaba will be running from 5-9 September at the Vodaworld Conference Centre in Midrand. Topics include, among others: the tax policy discussion led by Michael Katz and Judge Dennis Davis, a panel on balancing government enforcement against taxpayer rights, the challenges facing small service companies and the changes to the Tax Ombud.
The keynote address will be done by the South African Revenue Service' (SARS') Commissioner Tom Moyane.
Furthermore, the issues around the Bill will be discussed alongside other challenges, which affect the practitioner’s day-to-day dealings with clients.
“These are some of the reasons why it is so important that practitioners are constantly updating their skills and staying up to date with industry insight. You need to track workshops and conferences and find the time to attend. It is at these events where pertinent and topical issues are discussed and practitioners have a chance to speak with other professionals,” Ngwenya urges.
“Not only can you upgrade your skills, but you can compare notes and engage with other people. It’s nice to discover that you are not alone when it comes to the problems you face as a professional or as a practioner. The cherry on top of attending this conference will be the structured CPD points that may be accumulated by participating, these will be electronically tracked throughout the conference,” she adds.
Attendees can gain insight into tax dispute resolution, how to approach a SARS payroll audit and estate planning for savings and small business.
For a complete programme of events visit http://taxindaba.co.za/
MEDIA CONTACT: Idéle Prinsloo, 082 222 9198, email@example.com, www.atthatpoint.co.za
For more information on SAIPA please visit:
LinkedIn: South African institute of Professional Accountants group
Facebook: South African Institute of Professional Accountants