Business rescue is a formal legal process for a company that is in financial distress but might still be saved. It is not a way to avoid creditors, it is not informal, and it is not something you decide on over a weekend.
It is also widely misunderstood by the small businesses most likely to need it — usually as either a magic reprieve or an admission of failure, and it is neither.
What it actually is
A company in financial distress can be placed under supervision, with a business rescue practitioner appointed to take control of its management. While it is in rescue, most legal proceedings against the company are suspended, which buys the breathing space that is the whole point.
The practitioner develops a plan setting out how the company will be restructured and what creditors can expect. Creditors vote on it. If it is adopted, it binds them.
Two things follow from that description. The first is that you lose control of the business — the practitioner runs it. The second is that it only works if there is a viable business underneath. A company with no realistic path back to solvency is not a rescue candidate; it is a liquidation.
When it is appropriate
Where the underlying business works but the balance sheet does not. A company with real customers, real margins and a debt load it cannot service is exactly the case the process exists for.
Where the problem is that the business does not make money, rescue postpones the outcome at considerable cost. The practitioner's fees are substantial and rank ahead of most creditors, which means the process itself consumes value that would otherwise have been available.
For a small company, the honest question is whether the fees and the loss of control are proportionate to what is being saved. Frequently they are not, and a negotiated arrangement with creditors achieves more.
The duty that arrives before you get there
This is the part small company directors most often do not know. Once a company is in financial distress, the Companies Act places obligations on directors — including, at minimum, notifying affected persons if the board decides not to begin rescue proceedings, and giving reasons.
Continuing to trade and to incur debt when you know the company cannot pay carries personal consequences. Directors can be held liable for reckless trading, and "I hoped it would come right" is not a defence that has served people well.
This is the single strongest reason to take advice early. The window in which the options are good is also the window in which most owners are still hoping the problem resolves itself.
What to do instead, often
For most small companies the realistic alternatives are a negotiated arrangement with creditors, a sale of the business or its assets while it still has value, or an orderly wind-down. None of them is dramatic and all of them preserve more than a badly-timed formal process.
The common factor is time. Every one of these options is available at six months of runway and almost none of them at two weeks.
General description of a legal process, not legal advice. Business rescue, directors' duties and insolvency are areas where you should take proper professional advice, early.