I have interacted with many people on the subject of corporate rescue proceedings. Quite honestly, many have told me that they do not understand what corporate rescue proceedings entail.
They even treat the process with suspicion. I then had to take time to explain to them, mostly lay people, the process. Some of the issues I have had to deal with are explained below.
Corporate Rescue
For ease of reference and for the benefit of first-time readers, I will define corporate rescue. In terms of section 121(1)(b) of the Insolvency Act (Chapter 6:07) or “the Insolvency Act,” corporate rescue means proceedings to facilitate the rehabilitation of a company that is financially distressed by providing for:
the temporary supervision of the company, and of the management of its affairs, business, and property.
a temporary moratorium on the rights of claimants against the company or in respect of property in its possession.
the development and implementation, if approved, of a plan to rescue the company by restructuring its affairs, business, property, debt, and other liabilities, and equity in a manner that maximises the likelihood of the company continuing in existence on a solvent basis or, if it is not possible for the company to continue in existence, results in a better return for the company’s creditors or shareholders than would result from the immediate liquidation of the company.Types of Corporate Rescue Proceedings
Corporate rescue proceedings in terms of the Insolvency Act can be:
Voluntary or Involuntary.Voluntary Corporate Rescue Proceedings
This type is foreign to most people. According to section 122(1) of the Act, the board of a company may resolve that the company voluntarily begin corporate rescue proceedings and place the company under supervision, if the board has reasonable grounds to believe that:
The company is financially distressed.
There appears to be a reasonable prospect of rescuing the company.
According to section 122(2), a resolution contemplated in section 122(1) may not be adopted if liquidation proceedings have been initiated by or against the company and has no force or effect until it has been filed with the Master of the High Court and the Registrar of Companies.
Involuntary Corporate Rescue Proceedings
This is the type of corporate rescue many people are familiar with and is used mostly by creditors.
According to section 124(1) of the Act, an affected person may apply to a court for an order placing the company under supervision and commencing corporate rescue proceedings.
According to section 124(4), after considering an application in terms of section 124(1), the court may make an order placing the company under supervision and commencing corporate rescue proceedings if satisfied that:
The company is financially distressed.
The company has failed to pay over any amount in terms of an obligation under or in terms of a public regulation or contract, with respect to employment-related matters.
It is otherwise just and equitable to do so for financial reasons.
Independence of Corporate Rescue Practitioners
I have explained that corporate rescue practitioners ought to be and must be seen to be independent when performing their duties. The Insolvency Act has safeguards regarding the independence of corporate rescue practitioners, including who qualifies for appointment and the standard of conduct expected of a practitioner.
Checks and Balances
Corporate rescue practitioners are supervised by the Master of the High Court in terms of the Insolvency Act.
They are also members of and regulated by the Council of Estates Administrators and Insolvency Practitioners (“CEAIP”) in terms of the Estate Administrators Act (Chapter 27:20).
Whether a corporate rescue practitioner will sell the business to another investor is a pertinent issue. On Thursday, 11 December 2025, I wrote an article titled “Financing a Company under Corporate Rescue.”
One of the ways of raising finance is through the issuance of new shares to a new investor in exchange for a capital injection into the company.
Many existing shareholders may resist this as it has the effect of diluting their current shareholding.
However, the comfort is that the Insolvency Act has formalities required to be observed before such shares can be sold. Companies also have safeguards in their Articles of Association.
The law on corporate rescue is not simple to understand. I tend to agree with this view. There is room for the law to be simplified.
However, in my view, guidance can be provided by corporate rescue practitioners and legal practitioners. There is now a lot of literature on the internet on corporate rescue practice. I have written several articles thereon for the benefit of readers.
Whether corporate rescue practitioners prioritise their fees is another common concern. This is not true. In any case, these fees are regulated, and the Master of the High Court has a say. In my view, this is just a perception that needs correcting.
Conclusion
Corporate rescue proceedings are not readily understood. The profession working with the Master of the High Court needs to do a lot more for awareness and appreciation by the general public.
Disclaimer
This simplified article is for general information purposes only and does not constitute the writer’s professional advice.
Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), Hons B.Compt (UNISA), CA(Z), ACCA (Business Valuations), MBA(EBS, Heriot-Watt, UK), is the Managing Partner of Hofisi & Partners Commercial Attorneys, a chartered accountant, insolvency practitioner, commercial arbitrator, registered tax accountant, and advises on deals and transactions. He has extensive experience from industry and commerce and is a former World Bank staffer in the Resource Management Unit. He sits on the Council of Estate Administrators in Zimbabwe. He writes in his personal capacity. He can be contacted on +263 772 246 900 or ghofisi@hofisilaw.com or gohofisi@gmail.com. Visit www.hofisilaw.com for more articles. He has been writing weekly articles in the newspaper since 2020.-herald
