In a recent unanimous judgment penned by Mathopo J in Salungano Group Ltd v Mashwayi Projects (Pty) Ltd and Others; Ndalamo Coal (Pty) Ltd v Mashwayi Projects (Pty) Ltd and Others [2026] ZACC 38, the Constitutional Court resolved a long-standing interpretive dispute concerning which creditors are entitled to vote on the adoption of a business rescue plan under Chapter 6 of the Companies Act 71 of 2008 (the Act). The judgment confirms the strict limits of voting rights in business rescue and provides important guidance for business rescue practitioners, creditors and financiers.
In this matter, Arnot Opco (Pty) Limited (Arnot), which owns and operates the Arnot coal mine in Middelburg, Mpumalanga, was placed under business rescue on 10 October 2022 at the instance of its indirect 50% shareholder, Wescoal Mining (Pty) Limited (Wescoal). Wescoal, itself a wholly owned subsidiary of Salungano Group Limited, was later placed under its own business rescue. Mashwayi Projects (Pty) Limited (Mashwayi) was a creditor of Arnot, having taken cession of claims from several former creditors. Ndalamo Coal (Pty) Limited (Ndalamo) had a direct and substantial interest in this matter because, at a creditors' meeting held on 28 July 2023, it was voted as the successful bidder for the acquisition of Arnot and its business.
At that meeting, creditors were asked to choose between four options for Arnot's future, including refurbishment and continued operation, sale of the business as a going concern, rejection of the plan or abstention. The practitioner reported that Option B (sale as a going concern) was supported by 75.4% of the creditors' voting interests and that Ndalamo's competing bid for the business was then approved with 88% creditor support.
Four days later, however, the practitioner alleged material irregularities in the voting process, including duplicated votes, late proxies, retracted votes and creditors who had voted both as a group and individually, concluding that the 75% threshold required by section 152(2) of the Act had in fact not been met.
The central legal question that followed was whether the term "creditor" in Chapter 6 of the Act:
- includes post-commencement creditors, that is, persons who become creditors of the company only after business rescue begins, thereby entitling them to vote on a business rescue plan; or
- is confined to pre-commencement creditors only, being creditors of the company at the time the business rescue proceedings commence.
This question arose because the applicants contended that if post commencement creditors were excluded from the calculation of the vote, the vote would have passed in favour of adopting the plan proposed.
The High Court held that the term was confined to pre-commencement creditors and that, once Mashwayi's vote (as a post-commencement financier) was excluded, the 75% statutory voting threshold had been reached.
The Supreme Court of Appeal disagreed, holding that the Act does not distinguish between pre- and post-commencement creditors and that "creditor" must be given its ordinary grammatical meaning so as not to offend the equality provisions of the Constitution. Additionally, it held that the creditors' list compiled at the start of business rescue is intended to establish the concursus creditorum for liquidation purposes and is not relevant to determining voting rights in respect of a business rescue plan. Accordingly, Mashwayi had a voting right and the inclusion of its vote would result in the 75% statutory voting threshold not being met. It nonetheless found the voting process so compromised by irregularities that a fresh vote was required.
On appeal, the Constitutional Court declared that Chapter 6 of the Act does not permit post-commencement creditors to vote on the adoption of a business rescue plan. In reaching this conclusion, the court undertook a close textual and purposive analysis of Chapter 6.
Creditors, as an "affected person" in section 128 of the Act, fall within a broad category of persons who come together in a collaborative effort to rescue the company. The term should not be given an extensive meaning wide enough to include post-commencement creditors, as this would affect the normal procedure for the determination of claims and recovery thereof.
Section 145(2)(a), read with sections 151 and 152 of the Act, prescribes that voting on the business rescue plan is limited to holders of a voting interest, determined by reference to the admitted or proved claims identified in the plan. The words "owed to that creditor by the company" in section 145, which deals with the determination of voting interests, clearly excludes post-commencement creditors. The legislature must have assumed that the meaning of "creditor" would be clear; as an "affected person", it must only include creditors that existed at the initiation of business rescue. If post-commencement creditors were to be included, voting interests would constantly fluctuate as post-commencement claims were incurred or reduced.
Section 150(2)(a)(ii) of the Act requires the business rescue plan to contain a complete list of the company's creditors "when the business rescue began", together with their insolvency-law ranking. The court treated this as a deliberate indication that only pre-commencement creditors were intended to be part of the voting architecture, since the Act contains no mechanism to identify or value post-commencement creditors for this purpose.
Post-commencement creditors are not left unprotected: section 135 of the Act grants them a statutory super-preference over all other creditors, which the court characterised as the legislature's chosen trade-off of security in place of voting power, designed to incentivise lending to distressed companies without allowing those lenders to dilute or outvote pre-commencement creditors.
The court also found the Supreme Court of Appeal had erred in dismissing comparative guidance from other jurisdictions with similar restructuring regimes. It noted that under the United States' Bankruptcy Reform Act, Japan's Corporate Reorganisation Act, Singapore's Insolvency, Restructuring and Dissolution Act, India's Insolvency and Bankruptcy Code and the United Kingdom's Companies Act, post-commencement creditors generally do not have voting rights on a reorganisation or rescue plan, a position the court regarded as consistent with South Africa's own statutory design.
