Why you should consider becoming a business practitioner
Hint: You get to play forensic detective into the lives of people like the Guptas
Louis Klopper is a business rescue practitioner (BRP) and turnaround master. His most recent engagement is rescuing the eight Gupta-controlled companies that were placed in business rescue earlier this year after Bank of Baroda pulled out of the country, leaving the Guptas without banking services.
He has had to face down some 42 court challenges from previous Gupta managers, creditors and liquidation practitioners seeking to remove his team of BRPs and replace them with more Gupta-friendly ones. Some of the cases came from liquidation practitioners who got legitimate creditors to sign over their claims. Their motivation for doing so was obvious: by liquidating rather than rescuing the companies, they could sell of the assets for between R3bn and R5bn and pocket 10% for themselves.
You can read more about this in Moneyweb: https://www.moneyweb.co.za/news/companies-and-deals/business-rescue-practitioners-face-down-42-court-cases-from-gupta-associates-and-creditors/
So, why should you consider becoming a business rescue practitioner, and what’s involved?
There is no doubt that Klopper loves his job, and sees a broader social benefit. “There are several good reasons to become a practitioner: for one, you are helping to rescue rather than liquidate companies, and this is for the social good. Jobs are preserved for the most part, creditors stand to receive more than they would in a liquidation, and the company gets to continue making a contribution to the broader economy,” he says.
Okay, so much for the feel-good stuff. What’s in it for me, you might ask? The income is not bad either. For a senior BRP, earnings can be up to R25,000 a day, and around R15,000 a day at the more junior levels.
To be a BRP, you need either an accounting or a legal background. As Louis Klopper found out, you need a good lawyer at your side if you are going into business rescue. A company in business rescue is like the scent of a wounded animal to a pack of hyenas. They go for the kill, seeking to grab as much as they can for themselves. You may need a lion or two by your side to keep them at bay.
A legal practitioner should have a good knowledge of the Companies Act, Close Corporation Act, parts of the Insolvency Act, Labour Relations Act and the Basic Conditions of Employment Act. An accounting practitioner should be able to prepare and present management accounts and annual financial statements, interrogate source documents and accounting systems and have familiarity with the Independent Review Process. You need to be able to develop a sound business rescue plan and identify operational inefficiencies.
Global research has concluded that financial distress doesn’t occur overnight. It has a long incubation period and early warning signs of trouble are missed or ignored. For a company to be placed in business rescue, it has to satisfy the court that there is a reasonable likelihood of it being able to pay its debts as they become due after rescue. To continue trading recklessly is against the law – this is where promises to creditors are broken or honoured with difficulty.
Factual or Technical Insolvency occurs when the liabilities of an organisation exceeds its assets. This can be determined via a balance sheet test indicating the ability to meet obligations from resources.
Commercial Insolvency occurs when the organisation cannot pay its debts as and when they fall due and may be determined via a cash flow test indicating whether resources are available, now and in the future to meet financial obligations as and when they fall due.
At the first sign of financial distress, a company should apply for business rescue or face the possibility of being found guilty of trading recklessly. If liquidation proceedings have commenced, an application to court for business rescue will suspend the liquidation proceedings until the court has decided on the matter. Once the court has authorised business rescue, all other legal proceedings are suspended, except in certain circumstances (witness the unrelenting efforts of previous Gupta managers to shut down the BRPs – all of which failed, at substantial cost to the litigants).
This is by no means an exhaustive resume of the life of a BRP, as Louis Klopper will address SAAA members and detail exactly what is involved, the good, the bad and the ugly. Suffice it to say, this is a presentation you do not want to miss. For one thing, you will get a front row seat to one of the most riveting stories in South Africa at the moment – the unravelling of the Gupta empire of chaos.
Make sure you do not miss this. You can sign up here: https://accountingacademy.co.za/events/business-rescue-2017
Important to note: Accountants can now become Business Rescue Practitioners, opening a new revenue stream for their businesses. In support of the application to become a Practitioner with the Companies and Intellectual Property Commission (CIPC), the course will equip learners with the tools and knowledge to become accredited and obtain a licence in business rescue practice.
Saiba (The Southern Africa Institute for Business Accountants) is a controlling body for Business Rescue Practitioners.
By Ciaran Ryan
We recommend that you signup for the Business Rescue event.