N E W S & V I E W S • S E P T E M B E R 2 0 2 4 21 of a business. With contractual commitments, supply agreements and important long term business relationships, most businesses are unable to implement and effect cost-saving measures quickly. Businesses therefore need to look at where a reduction in costs can be achieved relatively quickly. Although not an easy decision to make, reducing your labour costs will assist in weathering the storm of suppressed markets in the short term. Some options to consider include: • Eliminating overtime and work on weekends; • Placing employees on short time; • Varying employees’ terms and conditions and having employees carry out different roles and responsibilities; • Shift rotation and different working-time arrangements; • Encouraging employees who qualify to take early retirement; • Lay-offs; • Retrenchments (including voluntary retrenchments). When contemplating the implementation of any of the above measures, please ensure that you comply with all applicable employment legislation and your own internal policies and procedures. Insurance options Depending on the severity of the impact on your business, you may be entitled to claim on your Business Interruption Insurance, which can cover potential loss of income and increased expenses when your operations are interrupted due to specified unexpected events. The wording of your policy would need to be carefully considered as it may be limited to unexpected events such as fires and natural disasters only. Financial considerations Have you made provisions for a rainy day, emergency incident or downturn in business? Depending on the nature of your business, if you do have cash reserves, it may be prudent to dip into these cash reserves and keep your business ticking over. It may also be worthwhile contacting your bank and exploring bridging finance or short-term loan options, which could be accessed if required. Business rescue proceedings Another option, although appearing somewhat drastic to consider is placing your business in business rescue. There are positives and negatives to business rescue and which, if utilised correctly, can offer businesses the lifeline they desperately need. If a business is financially distressed (that is, it cannot pay its ongoing creditors in the next six-month period or will become insolvent on its balance sheet in the next six-month period) then directors could consider placing the business into business rescue. A business rescue practitioner would be appointed to supervise the affairs of the business on a temporary basis while the business is being restructured and reorganised, to ensure that the business continues in existence on a solvent basis and is restored to solvency. There must be a realistic prospect that the company can be rescued. If not, then the company shouldbe placed into liquidation. The benefits of business rescue include the business being given a temporary stay on the rights of claimants against the business or in respect of property in its possession. This allows the business some breathing room from its creditors and an opportunity to turn things around. In conclusion The upshot is that suppressed markets are going to be our reality for a while and we need to adapt to the changing environment. Navigating suppressed markets will no doubt involve the implementation of a combination of the measures set out above, and there is no “one size fits all” model. Each business is different with unique characteristics that make it profitable. Tapping into those characteristics while implementing the above measures will be key to weathering the storm – what will work for one business, might be a relative nightmare for the next. However, it is recommended that all options be considered and some “out the box” thinking cannot hurt either. This article should not be used as legal advice as it is merely an opinion piece and for information purposes. Comprehensive legal advice should be sought before implementing any of the options discussed in this article.
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