Creditor Voting Rights During Business Rescue in Terms of the South African Companies Act 71 Of 2008

Abstract

Chapter 6 of the South African Companies Act 71 of 2008 (the “Companies Act”) deals with a process referred to under South African law as “business rescue”, aimed at the rehabilitation of financially distressed companies. An important question in relation to the business rescue process is whether only pre-commencement creditors have voting rights during business rescue, or do both pre-commencement creditors and post-commencement creditors have voting rights? The relevant provisions of the Companies Act are not clear. On 2 October 2023, the High Court of South Africa handed down a judgment, finding that only pre-commencement creditors have voting rights on a business rescue plan. The author of this paper submits a specific explanation in relation to the rationale for this conclusion by the High Court. The High Court judgment was overturned by the Supreme Court of Appeal of South Africa in a judgment handed down on 29 January 2025, finding that both pre-commencement creditors and post-commencement creditors are entitled to vote on a business rescue plan. Subsequently, an application was lodged for leave to appeal to the Constitutional Court of South Africa. Currently uncertainty exists in relation to the subject matter. This paper deals with the subject matter in more detail and proposes remediating steps to establish clarity.