SCA confirms that post-commencement creditors have the right to vote on the adoption of a business rescue plan

In its landmark decision of Mashwayi Projects (Pty) Ltd and Others v Wescoal (Pty) Ltd and Others, the Supreme Court of Appeal confirmed that post-commencement creditors have the right to vote on the adoption of a business rescue plan.

Examining the use of the word ‘creditor’ in sections 128, 135, 145 and 150 of the Companies Act, the SCA confirmed that a grammatical, contextual and purposive interpretation must be adopted. Adopting such an interpretation, the SCA held that:

• the absence of a specific definition of ‘creditor’ is an indication that the legislature did not contemplate a specific meaning other than the ordinary grammatical meaning of the word; that is a person or entity to whom an unpaid debt is due.
• as the Companies Act does not classify creditors and does not afford pre and post commencement creditors different or unequal rights, there is no basis to import, via interpretation, any such different or unequal rights.

Accordingly, pre-commencement creditors and post-commencement creditors have equal rights and the votes of post-commencement creditors must be taken into account in determining whether sufficient votes have been passed to validly adopt the business rescue plan.

The decision provides welcomed clarity on the position of post-commencement creditors in business rescue proceedings and provides certainty for financiers wishing to provide post-commencement financing to companies entering into business rescue proceedings under chapter 6 of the Companies Act.