By: Justicia Shipena, Kelvin Chiringa
Not all businesses are going to be rescued. The Business Rescue Task Force (BRTF) on economic advancement and business rescue in Namibia revealed this in a recent final report. They submitted the report to President Hage Geingob on Thursday.
According to BRTF, business rescue should only be pursued when there is a reasonable prospect that the business is capable of being rescued.
“The South African courts have indicated that for there to be a reasonable prospect of rescuing a company, one ought to indicate the cause of the company’s potential demise or the reasons for its possible failure and offer a remedy for such demise that is likely to be sustainable,” the report reads.
Thus, BRTF, chaired by chartered accountant and banking expert Thinus Prinsloo, said one would need to provide concrete and objectively ascertainable facts beyond mere speculation.
“(These must) indicate that the remedy proposed is reasonable and sustainable; a comprehensive legal framework should be introduced for all types of business segments of the economy, including companies, close corporations, sole proprietors, partnerships, trusts and public enterprises,” said BRTF.
BRTF said a business rescue process aims to delay liquidation, “Or the winding up of a business, provided it ensures better returns for creditors and shareholders or investors than liquidation and could serve as a sustainable solution to stop businesses from closing down and saving jobs.”
However, Director at SMEs Compete, which helps start-ups, Danny Meyer, questioned who would determine which business deserved rescuing and which did not.
“Who is going to be the judge or the jury? I don’t think it’s quite as clear-cut as that,” he submitted.
Further, the task force is gunning to set up a business rescue fund that will involve government, the private sector, and international investors.
Meyer has cautioned the task force against seeing international investors as “father Christmas, ” saying profits and interests will always drive them.
“I think that again is being myopic. Investors invest because they want a return. They don’t just invest because they feel like a father Christmas. So, I think that is a bit of wishful thinking and myopic on the part of those who make such a suggestion,” he said.
Forever Haiduwa, director of Forever Investments, has questioned how committed international investors will likely be to put their money in this fund.
“There is no doubt that international investors have money. The only question is, what is their interest? There is no question that there is still money in the private sector of Namibia. The question is, are they willing to support other businesses?” he said.
BRTF, in its report, said they would ensure that Namibia’s business rescue policy and legislative regime represent a relevant hybrid of international legislation.
Additionally, BRTF said it would focus on immediate business rescue initiatives that could be implemented within the next 12 months.
This is to take pressure off already struggling and financially distressed businesses.
“In carrying out its duties, the BRTF researched global and regional business rescue landscapes,” it said.
BRTF also undertook widespread consultations with several local and regional experts and individuals representing public institutions.
Regarding the legislation recommendations, BRTF submitted that the state should introduce a comprehensive legal framework for all segments of the economy.
It said this is to delay insolvency proceedings, including legal action and realisation of collateral and gain valuable time to facilitate restructuring, workouts and re-financing where required.
“Different approaches will be required for different size entities and consumers, hence the proposed segmentation.”
The Task Force said the Bussiness and Intellectual Property Authority (BIPA) is in the process of drafting Namibia’s Business Law which it expects to include a chapter on business rescue.
“This will ultimately replace the Companies Act 2004 (Act 28 of 2004). The task force recommends that, while this process is ongoing, the government should, in the meantime, within 12 months, amend the current Companies Act to include a chapter on Business Rescue and repeal Chapter 15.”
Another recommendation by the Task Force was to expedite the finalisation of the new Namibia Business Law, namely to amend the Close Corporations Act 1988 (Act 26 of 1988) to include a chapter on Business Rescue.
This also includes amending the Public Enterprises Governance Act (PEGA) 2019 (Act 1 of 2019) to have a chapter on business rescue.
The Task Force further recommended that the merger process used by the Namibia Competition Commission (NaCC) be amended to permit a fast-tracked process for mergers if this is the most feasible way to rescue the business, as per the approved Business Rescue Plan.
They further said the state should expedite the passing into law of the Consumer Protection Bill currently in preparation by Namfisa, as it has provisions on insolvency proceedings.
“It is further recommended that the business rescue process takes place outside of a court process (i.e., should be entrusted to a public institution such as BIPA) but be legislated and regulated to allow for the staying of legal action, where appropriate. Aggrieved parties will, however, still be able to approach the courts for remedy.”
During the handing over of the report, Prime Minister Saara Kuugongelwa-Amadhila told the Task Force that she hoped they could get insight into how many companies are actually facing this urgent situation.
“And get an indication of who has the potential to be rescued and who not, so that you don’t also create expectations to everyone experiencing problems that help is coming, and then they are disappointed when it does not happen.”
“If it has not been done, there should be some kind of interaction between the team the President commissioned and the stakeholders who will take up this proposal.”
