Valuation practices under business rescue circumstances in South Africa

Conradie, Shaneen; Lamprecht, Christiaan

doi:10.4102/sajems.v24i1.3721

Cited by 6 publications

(9 citation statements)

References 18 publications

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“…Accordingly, this approach has two main underlying expectations, namely that the company will be a going concern and that the assets will generate profits in the future. 116 As such, it is no surprise that this approach and, in particular, the DCF method are extensively used for reorganisation purposes in order to determine value on a going-concern basis. 117 However, when it comes to cryptoassets, these circumstances may present certain challenges as cryptoassets hardly ever generate income while, usually, there is no sufficient information to project the amount and timing of future income.…”

Section: Income Approachmentioning

confidence: 99%

Valuation of cryptoassets in EU insolvency: Challenges and prospects

Kostoula

2023

Intl Insolvency Rev

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How and when to determine the value of cryptoassets in insolvency proceedings? This question becomes more topical with the increasing adoption of volatile cryptoassets such as Bitcoin. As many of these assets do not have an ‘apparent’ value that may be readily ascertainable, it is not always clear how their value may be established. This presents significant challenges to their proper valuation in the context of insolvency proceedings and requires certain attention to efficiently confront the implications on the assessment of claims, the calculation of their value and the determination of the recoverable amount. Accordingly, this Article exposes the arising challenges and implications from an EU insolvency perspective, with the aim to trigger considerations for legislative interventions at EU level.

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Section: Income Approachmentioning

confidence: 99%

Valuation of cryptoassets in EU insolvency: Challenges and prospects

Kostoula

2023

Intl Insolvency Rev

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“…Section 150(2) of the Act stipulates compulsory elements to be included in the business rescue plan. The above-mentioned section requires the business rescue plan to disclose, inter alia, the PLV, the BRV, as well as the preference ranking that will be applied to pay creditors, should the business rescue plan be adopted (Conradie and Lamprecht 2021;Loubser 2010). In order to determine the PLV and the BRV, the practitioner will need to determine both the liquidation value and the going concern value of the firm as well as the value of the firm's assets in both cases (Conradie and Lamprecht 2021).…”

Section: Literature Reviewmentioning

confidence: 99%

“…The above-mentioned section requires the business rescue plan to disclose, inter alia, the PLV, the BRV, as well as the preference ranking that will be applied to pay creditors, should the business rescue plan be adopted (Conradie and Lamprecht 2021;Loubser 2010). In order to determine the PLV and the BRV, the practitioner will need to determine both the liquidation value and the going concern value of the firm as well as the value of the firm's assets in both cases (Conradie and Lamprecht 2021). The creditors will then evaluate and compare the PLV and the BRV and vote in favour of or against the business rescue plan (Levenstein 2015;Rosen et al 2011).…”

Section: Literature Reviewmentioning

confidence: 99%

Informing the Vote: The Business Rescue vs Liquidation Decision

Rosslyn-Smith

Abreu

2022

SABR

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Background: Non-unitary insolvency systems require an initial choice between liquidation and rehabilitation. For those systems, the decision to further support rehabilitation is often reinforced by the estimate of a lesser return in liquidation. The creditors’ decision to either accept or reject the business rescue plan depends substantially on comparing the proposed liquidation value with the business rescue value that is mandated in the business rescue plan. Purpose: The purpose of this study is to compare the proposed liquidation value with the actual liquidation value of firms that had commenced business rescue proceedings but were subsequently liquidated. This study is exploratory; therefore, our aim is to use the findings of this study to derive future research opportunities for scholars to explore. Methodology: This research adopted a content analysis research approach by collecting documents such as business rescue plans and liquidation accounts, which are qualitative in nature, and describing these documents through quantitative data analysis. Findings: The study revealed that for the secured creditors’ sample, there was a significant difference between the proposed liquidation value and the actual liquidation value. For the unsecured creditors’ sample, this study found no significant difference between the proposed liquidation value and actual liquidation value. Limitations: The major limitation of this study was access to data; therefore, the huge decline in the actual sample size in comparison to the expected sample size. Value: To the researchers’ knowledge, this is the first study comparing the proposed liquidation value to the actual liquidation value in order to determine whether differences exist. As a result, this study tackles a novel perspective on one of the influences that can affect the vote. This may be of particular importance to creditors, who may find the results of this study to be useful. Lastly, the findings of this study derived future research opportunities for scholars to explore.

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“…Previous research in South Africa confirmed the use of bidding processes when selling companies in business rescue (Britz 2018;Conradie & Lamprecht 2021). However, in the context of a South African business rescue attempt, where the BRP pursues a BRIL, these studies failed to describe the various bidding processes and important considerations during the BRPs decision-making that could preserve value for creditors and shareholders.…”

Section: Introductionmentioning

confidence: 99%

A qualitative exploration of the bidding processes used in business rescue

Conradie

Lamprecht

2022

J. econ. financ. sci.

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Orientation: In business rescue, when pursuing the sale of the business to a third party, the business rescue practitioner (BRP) may use different bidding processes to interact with and select buyers.Research purpose: This study aimed to provide a framework to classify and describe the various bidding processes, including identifying the factors that would preserve value to the benefit of creditors and shareholders.Motivation for the study: Chapter 6 of the Companies Act is silent on the requirements regarding bidding processes. Therefore, the industry and legislator may benefit from guidance from industry experts.Research approach/design and method: Qualitative exploratory, using semi-structured interviews with 11 South African senior business rescue practitioners.Main findings: Three types of bidding processes were identified. In a sophisticated bidding process, information is communicated to buyers using a virtual data room. The second bidding process is less sophisticated; printed document packs are provided to bidders, and bids are submitted in tender boxes. Thirdly, the private bid-out process, where preferred bidders compete against each other in a closed envelope boardroom auction. The findings also revealed that deal certainty is more important in business rescue than ordinary mergers and acquisitions. Moreover, an equitable value, rather than a general market value, is often applied because of the bidding process. Lastly, the study identified a need for the pre-involvement of the BRP before a company files for business rescue, an aspect not currently allowed by the Companies Act.Practical/managerial implications: BRPs can benefit from the explication of the types and detailed steps of bidding processes. Moreover, the findings fill the void of limited guidance in the Companies Act.Contribution/value-add: The classification and description of the various bidding processes and key considerations in the context of a business rescue will assist BRPs in South Africa in preserving value under business rescue and guide the legislator in amending the Companies Act.

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Valuation practices under business rescue circumstances in South Africa

Cited by 6 publications

References 18 publications

Valuation of cryptoassets in EU insolvency: Challenges and prospects

Valuation of cryptoassets in EU insolvency: Challenges and prospects

Informing the Vote: The Business Rescue vs Liquidation Decision

A qualitative exploration of the bidding processes used in business rescue

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