INTRODUCTION
Corporate rescue is a debtor friendly administration of financially distressed companies with a hope of resuscitating them from the solvency struggle, as provided for under the Insolvency Act [Chapter 6:07]. Introduced through the 2018 Insolvency Act, this process replaced the former system of judicial management and has become an essential element of Zimbabwe’s commercial law framework. Companies are rescued by changing management through the appointment of business administrators known as Cooperate Rescue Practitioner (CRP), in place of the company’s board. The statutory duty of the Directors to run the company is replaced by the CRP. The procedure is designed to sustain viable enterprises while safeguarding the interests of employees, creditors, and shareholders.
WHEN DOES COOPERATE RESCUE COMMENCE?
In terms of section 125(1) of the Insolvency Act, corporate rescue proceedings may commence in one of 4 ways. Firstly, corporate rescue may be initiated by the company by filing a board resolution to place itself under supervision. Next, the company may apply to the High Court for consent to file a resolution placing the company under supervision. The section also empowers an affected person to apply to the High Court placing the company under supervision. The final route is that the High Court may make an order placing a company under supervision during the course of liquidation proceedings, or proceedings to enforce a security interest. Failure to follow the proper procedure of putting a company under cooperate rescue makes the proceedings a nullity and they automatically fall away. In the case of Metallon Gold Zimbabwe (Pvt) Ltd & Others v Shatirwa Investments (Pvt) Ltd & Ors SC 107/21, the Court held that the respondents did not comply with the mandatory provisions of section 124 of the Insolvency Act, which required them to notify each affected party of the application by standard notice. The respondents failed to notify each affected party by “standard notice”, as is prescribed by section 2 of the Insolvency Act. Such non-compliance with peremptory provisions of the Insolvency Act rendered the application for corporate rescue fatally defective.
THE PROCEDURE AND EFFECT OF COOPERATE RESCUE PROCEEDINDS
The Insolvency Act provides two ways of commencing corporate rescue proceedings which are voluntary and involuntary.
- Voluntary Corporate Rescue
The first procedure is in terms of section 122(1) of the Insolvency Act, which provides that the board of a company or its shareholders can make a resolution to institute corporate rescue proceedings. This procedure is voluntary and does not require the company to approach a court. The resolution placing the company under supervision can only be taken if the company is financially distressed, in that it is unable to pay its debts and there appears to be reasonable prospects of rescuing the company. For the resolution to be effective, it must be filed with the Master of the High Court, the Registrar of Companies and the Registrar of Cooperative Societies, in the case of a cooperative society. The company must within five business days after filing the resolution notify every “affected person” and appoint a corporate rescue practitioner who satisfies the requirements of section 131 of the Insolvency Act. The responsibility of the corporate rescue practitioner is to oversee management of the company during the corporate rescue proceedings. This approach allows the company to avoid lengthy court processes, retain greater control over decision-making, and secure immediate protection through the statutory moratorium. It also enables directors to nominate a Corporate Rescue Practitioner who best understands the business and its operational environment.
- Involuntary Corporate Rescue
The second procedure is involuntary corporate rescue which arises when an “affected person” such as a creditor, shareholder, employee, or trade union as defined under Section 121(1) approaches the High Court to compel the company into rescue. This reactive measure is typically used where management refuses to recognise or address financial distress, or where an external stakeholder must act to safeguard their interests. Although it serves the same rehabilitative purpose, the involuntary path often involves higher legal costs, reduced director control, and slower progress due to the adversarial nature of court proceedings.
This second procedure, is made by way of an application to court for an order commencing corporate rescue proceedings. The procedure must be followed in terms of section 124 of the Insolvency Act. In terms of section 124 of the Act, where a company has not passed a voluntary corporate rescue resolution in terms of section 122, any affected person may apply to the Court at any time for an order placing the company under supervision and commencing corporate rescue proceedings, and such applicant must serve a copy of the application on the company, the Master and the Registrar of Companies, as well as notify each affected person by standard notice, all of whom are entitled to participate in the hearing. After considering the application, the Court may either grant an order placing the company under supervision if it is satisfied that the company is financially distressed, has failed to meet employment-related obligations arising from a public regulation or contract, or if it is otherwise just and equitable to do so for financial reasons, provided there is a reasonable prospect of rescuing the company, or the Court may dismiss the application and make any further necessary and appropriate order, including placing the company into liquidation.
OBJECTIVES OF CORPORATE RESCUE
- Preserving Viable Enterprises
The foremost objective of corporate rescue is to sustain companies that still have potential to recover. By keeping such firms operational, the law helps protect employment, supply chains, and overall economic stability.
- Enhancing the Value of Assets
Rather than immediate liquidation which often erodes asset value corporate rescue seeks to restructure and maximize a company’s assets for the benefit of its creditors and stakeholders.
- Preventing Liquidation
Liquidation is treated as a measure of last resort. Corporate rescue provides an alternative that can help retain business operations, preserve value, and minimize losses across the board.
KEY FEATURES OF THE CORPORATE RESCUE PROCESS
- Appointment of a Corporate Rescue Practitioner (CRP)
The process begins with appointing a qualified Corporate Rescue Practitioner who assumes control of the company’s affairs and develops a recovery strategy.
- Development of a Rescue Plan
The CRP prepares a comprehensive plan addressing financial, managerial, and operational problems. The plan must be presented to creditors for consideration and approval.
- Creditor Participation
Creditors are central to the process, they review, amend, or approve the proposed plan, thereby ensuring their interests are represented.
- Legal Protection During Proceedings
Once corporate rescue is initiated, a moratorium comes into effect, temporarily halting legal actions by creditors. This allows the company the space to restructure without disruption.
- Implementation of the Plan
If the plan is approved, the CRP executes it, which may involve debt restructuring, disposal of non-core assets, or operational adjustments to restore profitability.
WHEN DOES CORPORATE RESCUE END?
Corporate rescue proceedings under the Insolvency Act come to an end in several circumstances as outlined in sections 125, 134, 142,144 and 145. In terms of section 125(2)(a), corporate rescue ends where the High Court either sets aside the resolution or order placing the company under rescue, or where the Court converts the rescue proceedings into liquidation often following a practitioner’s finding under section 134(2)(a) that there is no reasonable prospect of rescuing the company. Rescue may also terminate when the corporate rescue practitioner files a notice of termination in accordance with section 125(2)(b), which typically occurs where the practitioner concludes under section 134(2)(a) that rescue is not achievable, or under section 134(2)(b) that the company is no longer financially distressed and rescue is no longer necessary.
Further, in terms of section 125(2)(c)(i), rescue ends when a proposed rescue plan is rejected by creditors and no affected person invokes their rights under section 145 to request a revision, contest the vote, or make a binding offer. Conversely, where a plan has been adopted, rescue ends once it has been substantially implemented and the practitioner files the required notice under section 125(2)(c)(ii) as read together with section 144(8). Additionally, section 142(2)(c)(iii) provides that the rescue plan itself may specify further circumstances under which rescue will end, meaning that contractual conditions embedded in the plan can also trigger termination upon the practitioner filing the relevant notice.
IMPORTANCE OF CORPORATE RESCUE IN ZIMBABWE
- Job Protection
Corporate rescue helps prevent unnecessary job losses by giving struggling companies a realistic opportunity to recover and continue operations.
- Economic Stability
Maintaining the continuity of businesses supports broader economic balance by preventing sudden collapses that can ripple through suppliers, creditors, and communities.
- Creditor Security
The process ensures creditors have input and a fair chance of recovering debts, often achieving better outcomes than liquidation would offer.
- Encouraging Investment and Entrepreneurship
A clear and fair rescue system builds confidence among investors and entrepreneurs by showing that the legal environment supports second chances for businesses.
CONCLUSION
Corporate rescue under Zimbabwe’s Insolvency Act provides a structured framework for reviving distressed companies. It balances the interests of all stakeholders, supports job retention, and promotes economic resilience. By fostering recovery rather than closure, the system encourages a business environment where failure is not final but an opportunity for renewal.