Business rescue was written into the Companies Act in 2009, allowing licenced practitioners to take over the running of failing businesses with a view to turning them around.
The SA Institute of Business Accountants (Saiba) is now training and licencing Business Rescue Practitioners (BRPs), creating new revenue opportunities for accountants seeking to specialise in this area. This is an opportunity for accountants to gain coal-face experience in business rescue and vastly increase their income.
CFO Talks spoke to one of the country’s top BRPs, Louis Klopper, currently engaged in the rescue of eight Gupta companies. You can listen to the interview here.
Klopper points out that many lawyers and accountants foolishly think that they can become BRPs without putting in the necessary legwork. A BRP is someone with the right competencies to rehabilitate a business in distress. It requires good analytical skills, and some street smarts – bear in mind that Klopper and his associates had to face down roughly 50 court cases in the rescue of the Gupta companies, many of them from opportunists trying to liquidate rather than save the companies (and so collect 10% fees on any asset sales realised).
“BRPs should possess certain minimum or critical competencies,” says Klopper. “First of all, you should have a good legal knowledge, a thorough knowledge of the Companies Act and its regulations, the Close Corporations Act and various acts that regulate labour, like the Basic Conditions of Employment Act, because business rescue is about the creditors and the staff of the company. It’s not about the owners, it’s not about the shareholders. It’s about the creditors and the staff because they are potentially the ones that could get hurt.”
Most accountants understand financials and can analyse how a company ended up in trouble. But they lack knowledge of the law, and often have little business experience. The best way to gain this experience is by apprenticing under someone like Louis Klopper for a period of time – something that Klopper is more than happy to provide to aspiring BRPs.
“You should have a good working knowledge of the independent review process because that is where you are going to poke around and find out what went wrong in the company and track any illegal transactions. You have to follow the money, where has it gone to, father the documentation, and generally operate like a forensic auditor,” adds Klopper.
“The third necessary skill for a business rescue practitioner and that’s analytical skills and that’s the analysis and interpretation of financial statements. If you are unable to analyse and interpret the financial statements using many techniques, ratio analysis and a lot of other techniques that have been developed by scholars over the years, you’re not going to be able to find out what is the core rot of the company or what are the core problems in the company. Then, of course, on top of that is your business management skills, you’ve got to have a strategic view on a company because, as you quite rightly pointed out, you’ve got to devise a business rescue plan at the end of the day
The key to business rescue will be the successful development and implementation, if approved by creditors, of a plan to rescue the business by restructuring its affairs. The Companies Act provides for this process of reorganising a company’s operations, assets liabilities and equity. Financially distressed businesses can start rescue proceedings by filing a notice with the CIPC (the Companies and Intellectual Property Commission), which regulates businesses, business registrations and oversees business rescue proceedings.
As a Saiba-trained BRP specialist, you will stand out from the crowd and be able to attract more clients or obtain more recognition at work. You will be able to accept referrals from other non-specialist accountants and in this way diversify your client composition to include business clients and other accountants. Specialist work generally can be offered at a higher fee than normal accounting work providing a much higher profit margin per hour of service delivered.
To sign up or find out more, click here.