Abstract

JOMBE, Melody Kuziwa  and  PRETORIUS, Marius. Direct and indirect impacts of business rescue on employment. JCMAN [online]. 2022, vol.19, n.2, pp.269-297. ISSN 1815-7440.  http://dx.doi.org/10.35683/jcm21058.167.

PURPOSE OF THE STUDY: South Africa's economic turmoil has resulted in a number of companies opting for business rescue, which is considered a better alternative than liquidation. Business rescue aims to resuscitate ailing companies and save them from liquidation. However, as companies enter into business rescue, little is known about what happens to the employees of these firms during the rescue proceedings. The purpose of this study was to investigate and get a better understanding of direct and indirect employment effects during business rescue. The study explored the direct and indirect employment effects during business rescue. Despite being associated with some negatives, such as retrenchments or loss of jobs, business rescue is claimed to play a vital role in saving jobs that would have been lost through liquidation. Under business rescue, remuneration continues, which positively effects economic activity and purchasing power parity. The study adds to a better understanding by exploring the interconnectedness of employment effects with the business rescue regime DESIGN/METHODOLOGY/APPROACH: Eighteen participants were approached and interviewed using semi-structured interviews; thus, the study was qualitative in nature. The study explored and addressed the research problem through licenced business rescue practitioners operating in Gauteng, trade unions that have a fair representation of employees who have been affected by business rescue, and creditors who have had an opportunity to lend post-commencement financing to troubled entities FINDINGS: The results show that business rescue impacts employees and their families as well as business suppliers, customers and shareholders. Some of the affected employees are breadwinners, and thus, any loss of job for them affects the people they are supporting. Suppliers, customers and shareholders are also affected by business rescue through loss of trading RECOMMENDATIONS/VALUE: The regulators, legislator, managers and practitioners must detect financial distress early to reduce the negative effects associated with business rescue. When a business goes into rescue, stakeholders must approve the process earlier to have a better chance of rescuing the business MANAGERIAL IMPLICATIONS: This research contributes to the management body of knowledge by exploring the interconnectedness of employment effects with the business rescue regime. While information on the importance and success of the business rescue process has been reported in the literature, there is much less on the impact of business rescue on the employees it saves from the liquidation JEL CLASSIFICATION: L29

Keywords : Business rescue proceedings; Business rescue practitioner; Companies Act; Direct employment effects; Indirect employment effects; Employees; Stakeholder theory.

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