{
  "id": 11867952,
  "title": "You could lose your shirt trying to rescue your company",
  "url": "https://urgent.news/2026/10/04/you-could-lose-your-shirt-trying-to-rescue-your-company",
  "topic": "business",
  "section": "Business",
  "published": "2026-10-04T07:00:00.000Z",
  "source": {
    "name": "IOL",
    "slug": "iol",
    "url": "https://iol.co.za/business/jobs/2026-10-04-you-could-lose-your-shirt-trying-to-rescue-your-company/"
  },
  "original_language": "en",
  "account": "In February 2026, 48 South African companies initiated business rescue, a trend that poses significant financial risks for small business owners. Research by the Turnaround Management Association Southern Africa (TMA-SA) analyzed data from 4,373 companies and Intellectual Property Commission (CIPC) proceedings, revealing that 1,409 were in business rescue as of March 2026. For owners who have personally invested in their businesses or provided collateral for debts, the consequences can extend far beyond simply losing their initial investment. Business rescue is a legal process under the Companies Act designed to allow financially distressed companies to restructure rather than be liquidated. A licensed practitioner oversees the company, legal proceedings against it are suspended, and a plan is created to address its financial issues. The ultimate goal is either to restore the business to solvency or secure a better outcome for creditors and shareholders than immediate liquidation. However, a recent Supreme Court of Appeal case involving Ubuntu Family Health Centre highlights the potential pitfalls. The company entered business rescue in November 2023 after Capitec canceled its finance agreement for a Porsche 911, leading Capitec to seek to recover the vehicle. The Supreme Court found that the business rescue moratorium did not prevent the bank from reclaiming property that Ubuntu was unlawfully possessing. Ubuntu was ultimately liquidated on May 24, 2024. This illustrates that the risk extends beyond luxury vehicles. Losing access to financed equipment or vehicles can cripple an attempt to continue trading. To avoid business rescue, a company must meet the criteria of financial distress as per the Companies Act, which includes a reasonable likelihood of insolvency within six months or becoming insolvent during that period. Warning signs include persistent cash flow shortages, difficulty paying suppliers or employees, mounting debt, and an inability to secure additional funding. Business rescue can be initiated voluntarily by the board if they reasonably believe the company is in distress and there is a reasonable chance of rescue. Alternatively, an affected person—such as a creditor, employee, or shareholder—can apply to court to place the company under supervision. The cost of business rescue is considerable. Practitioners' remuneration is capped at R1,250 per hour or R15,625 per day, including VAT, according to the Companies Act. Additional reasonable expenses and approved remuneration may apply. Furthermore, the business must fund its ongoing operations, including employees, suppliers, legal assistance, and restructuring costs. This financial strain is a significant challenge for SMEs already struggling to meet their obligations. A November 2025 presentation to Parliament by the Industrial Development Corporation (IDC) highlighted high costs and lengthy proceedings as major obstacles. The IDC recommended introducing a rescue regime tailored to SMEs to reduce costs and implementing early-warning measures to identify financially distressed businesses earlier. The Pretoria High Court set aside the business rescue of Seacrest Investments in June 2025 after the practitioner received more than R2.2 million in remuneration for a company with no employees, income, or operating business. The court found the rescue to have been initiated in bad faith and ordered the practitioner, company director, and company to pay punitive legal costs. While owners typically have a separate legal identity from their company, they are not entirely insulated from personal liability. An owner who signed a personal surety for a company loan may still face claims under that agreement, and money personally advanced to the company could be at risk. Even someone who owns 100% of a company could lose their entire shareholding if the business is liquidated without sufficient assets to meet its obligations. Notably, TMA-SA's research indicates that two-thirds of companies entering business rescue return to operation, preserving 87% of their economic value. However, the IDC's November presentation reported a success rate between 12% and 15%. TMA-SA director Stefan Steyn cautioned that rescues are neither quick nor guaranteed, with rescues taking an average of 18 months to complete, while failing companies spend over a year in the process before liquidation. This raises questions about whether some businesses enter rescue too late or persist in the process without realistic prospects of recovery. For SME owners, business rescue is thus not just about postponing creditors' claims but ensuring the viability of the business, securing sufficient funding for continued operations, and having a realistic chance of implementing a rescue plan.",
  "summary": "Business rescue is intended to give struggling companies a second chance, but it can take more than a year, cost money they no longer have and still end in liquidation.",
  "key_points": [
    "48 South African companies initiated business rescue in February 2026",
    "Business rescue can lead to loss of personal investments and collateral",
    "High costs and lengthy proceedings make business rescue risky for SMEs"
  ],
  "editors_take": null,
  "illustration": null,
  "coverage": {
    "outlets": 1,
    "also_reported_by": []
  },
  "ai_generated": true,
  "disclaimer": "Summaries, key points and the editor’s take are written by software from other outlets’ reporting and may contain errors — always check the linked original."
}