Case CCT 37/25 and 38/25
[2026] ZACC 38
Hearing Date: 19 February 2026
Judgement Date: 07 October 2026
Post Judgment Media Summary
The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.
On Wednesday, 7 October 2026, the Constitutional Court handed down judgment in two separate applications for leave to appeal against the judgment and order of the Supreme Court of Appeal (SCA). The SCA determined that post-commencement creditors may vote on a business rescue plan under the Companies Act 71 of 2008 (the Act) and that the amended business rescue plan presented on 28 July 2023 was not supported by holders of more than 75% of creditors’ voting interests as required by section 152(2) of the Act.
This dispute concerns a creditor vote on a business rescue plan at a meeting convened under section 152 of the Act. Arnot, which owns and operates the Arnot coal mine located in Middelburg, Mpumalanga, was placed under business rescue on 10 October 2022. Mr Mkhombo, who was appointed as Arnot’s business rescue practitioner, presented four different business rescue plan options to all affected persons. Relevant to the present dispute, Option B entailed the sale of the business as a going concern, with the proceeds distributed to creditors. Should Option B been approved, creditors would then consider four alternative acquisition proposals, including one submitted by Ndalamo. At the creditors’ meeting on 28 July 2023, Option B was allegedly supported by 75.4% of the creditor voting interest and Ndalamo’s bid by 88%. Option B and Ndalamo’s bid will be referred to collectively as the July plan.
Four days after the results of the vote were shared with creditors, circumstances changed significantly. The practitioner alleged that there were material irregularities in the voting process.
Consequently, the practitioner stated that the 75% threshold had not been met. According to the practitioner, the July plan was therefore not duly accepted. Wescoal and Salungano, who had voted in favour of the July plan, objected, contending that the statutory threshold had been met and therefore that the plan had been validly adopted. In light of these events, the practitioner scheduled a creditors’ meeting for 21 August 2023 to approve a revised plan and an updated voting interests schedule.
Unhappy with the practitioner’s conduct, Wescoal and Salungano instituted urgent proceedings on 13 August 2023 before the High Court. They sought declaratory orders that the July plan had been validly adopted, with an order directing the practitioner to implement the plan. The High Court held that the word “creditor” used in Chapter 6 of the Act refers exclusively to pre-commencement creditors, that is, persons who were creditors of the company at the time the business rescue proceedings commenced and does not extend to post-commencement creditors, that is, persons who became creditors after the commencement of the business rescue proceedings. On this construction, the July plan had reached the required threshold for approval, because Mashwayi – which had voted against the plan – should not have been treated as a creditor for voting purposes. It confirmed that the July plan had been adopted in accordance with section 152(2) of the Act.
Aggrieved by that decision, the respondents sought and were granted leave by the High Court to appeal to the SCA. The SCA held that the Act does not distinguish between pre- and post-commencement creditors. Accordingly, the term creditor should be interpreted in line with its ordinary meaning, and there should be no distinction among various types of creditors, as this would contravene section 9 of the Constitution and section 7(k) of the Act. On the factual issue, the SCA found that the voting process was inconclusive given the material irregularities and directed creditors to start afresh with the voting process. It further found that if Mashwayi’s vote had been taken into account, the statutory threshold in section 152(2) would not have been met. The SCA thus set aside the order of the High Court.
In this Court, the salient issues were identified as follows: (i) whether post-commencement creditors are included in the definition of “creditor” in terms of section 152 of the Act and thus entitled to vote on a business rescue plan; and (ii) whether the business rescue plan presented to creditors on 28 July 2023 was properly adopted in accordance with section 152 of the Act.
On the definition of creditor under the Act, this Court found that post-commencement creditors are not entitled to vote on a business rescue plan. It found support for this interpretation in the text, context and purpose of the Act. This Court made three principal textual arguments. First, Section 128 defines “affected persons” as persons directly impacted by the commencement of business rescue. This must mean creditors of the company that existed at the initiation of the business rescue. Second, section 145, which sets out how voting interests of creditors for the business rescue plan are to be determined and does not include post-commencement creditors as one of the three categories of creditors it lists. Third, section 152 requires a business rescue plan to contain a complete list of the creditors of the company “when the business rescue began”. The specific reference to a list of creditors “when the business rescue began” establishes that post-commencement creditors were not intended to have a voting interest in the business rescue plan.
This textual interpretation is borne out by the context and purpose of the Act. Post-commencement creditors are not contemplated as participants in the voting architecture because the business rescue plan is structured around the creditor body as it existed at the start of business rescue. Their protection lies instead in section 135, which affords them preferential treatment, rather than voting rights. It would be incoherent to grant a post-commencement financier a preferential claim under section 135 if that claim could then be suspended or extinguished by the business rescue plan. The fact that post-commencement financiers are granted a statutory preference, preserved even in liquidation, is a powerful inducement to lend to a distressed company in accordance with the purpose of the Act, namely the resuscitation of financially distressed companies. Moreover, if creditors were not limited to those existing at the time business rescue proceedings commenced, creditors’ voting interests would constantly be fluctuating as post-commencement claims were incurred or reduced. How then would the practitioner fix the voting interests in advance of any particular meeting? A constantly shifting body of creditors would greatly complicate business rescue proceedings.
In addition, this Court concluded that the SCA incorrectly rejected guidance from foreign jurisdictions. In some foreign jurisdictions that have business restructuring regimes similar to ours, such as those of the United States, Japan, Singapore, and India: post-commencement creditors do not have a right to vote. There is no reason to believe that the position in South Africa should, as a matter of policy, be any different.
On the factual issue, this Court found that several irregularities had occurred in the counting of creditors’ votes, casting doubt on whether the business rescue plan had been validly adopted. These included the double-counting of votes, the failure to consider emails withdrawing votes, inconsistencies in how certain creditors cast their votes, and the late submission of some proxies. Although the forensic accountant initially calculated that 72,2% of creditors’ voting interests supported Option B, this figure was later revised to 70,5%. Given these irregularities and the uncertainty surrounding the final voting outcome, this Court was unable to find that the plan had been validly adopted. It accordingly upheld the SCA’s finding that the matter should have been remitted back to the creditors for a fresh vote.
This Court further considered whether the matter could be remitted back for a fresh vote, despite the fact that the Companies Act does not expressly provide for such a procedure. It held that sections 153(1)(a)(i) and 140(3)(a), (b) and (c)(ii), read together, provide a basis for remittal. This Court emphasised that the business rescue practitioner's statutory obligations extend to ensuring the proper adoption of a business rescue plan. In this case, the irregularities undermined the credibility and legitimacy of the voting process and made a fresh vote necessary. This Court therefore concluded that it was “just and equitable” to remit the matter to the business rescue practitioner for the creditors to vote afresh.
This Court concluded that, when properly interpreted, the Companies Act excludes post-commencement creditors from voting on the adoption of a business rescue plan. It found that allowing these creditors to participate in the vote would be inconsistent with the structure and purpose of the Act and would disrupt the balance the legislation seeks to maintain between the interests of pre- and post-commencement creditors.
The Full judgment here