Timeline of financial distress table
For a more detailed explanation, go to Timeline of financial distress on the web site of CRS Turnaround.
Turnaround and the Timeline of Financial Distress |
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Informal Turnaround Processes (outside of the legal framework provided by the Companies Act and Insolvency Act) |
Formal Legal Processes | ||||
Chapter 6 of the Companies Act No. 71 of 2008 |
Insolvency Act |
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Emerging problems |
Acute and worsening problems |
In financial distress but economically viable |
In financial distress and not economically viable |
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Management-led correction |
Informal creditor workout |
Business rescue
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Liquidation |
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Turnaround in the absence of creditor pressure. There is no creditor pressure since the financial situation is not yet critical. |
Turnaround when the financial situation is already critical, but in the absence of creditor pressure. This is due to support from benevolent shareholders. e.g. distressed government organisations, SOEs and companies with financial support from holding companies. |
Turnaround given an informal agreement, between management and creditors to reduce indebtedness. Creditors are normally banks and institutional lenders. Management remains in charge, but the agenda is determined by the workout agreement. |
Turnaround characterised by the temporary supervision of the management of the company, a temporary moratorium on the rights of claimants against the company, post-commencement finance, cram-down of dissenting creditors, and a business rescue plan. Chapter 6 of the Companies Act no. 71 of 2008 replaces judicial management (Sections 427 - 440 of the Companies Act No. 61 of 1973) and its Section 311 Compromise with Creditors. |
No turnaround - realisation of the distressed company's assets and the distribution of proceeds to its creditors. |
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Business rescue types |
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Pre-packaged Business rescue plan including funding largely negotiated prior to commencement of business rescue proceedings. |
Free-fall No pre-negotiation. |
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