Business Rescue Isn’t Just for Old Creditors: Voting Rights
In Mashwayi Projects (Pty) Ltd and Others v Wescoal Mining (Pty) Ltd and Others (1157/2023) [2025] ZASCA 5, the Supreme Court of Appeal (SCA) overturned a judgment of the Gauteng Division of the High Court, Johannesburg, and delivered an important clarification for South Africa’s business rescue regime.
The High Court had previously held that post‑commencement creditors do not have voting rights when a business rescue plan is considered. The SCA disagreed and in doing so, addressed a practical and commercially significant question:
Do creditors who extend funding after business rescue begins have the right to vote on the adoption of the rescue plan under Chapter 6 of the Companies Act 71 of 2008?
The SCA’s answer: Yes, where they hold a genuine financial interest in the outcome.
What Triggered the Dispute?
Companies in business rescue often require urgent, fresh capital to stay afloat. Those who provide this funding become post‑commencement creditors. The dispute centred on whether these creditors should be allowed to vote on the business rescue plan, or whether voting rights should be limited to pre‑rescue creditors only.
Two competing views emerged:
- Restrictive view: Only pre‑commencement creditors should vote.
- Commercially realistic view: Post‑commencement funders, who take on real risk to keep the company alive, should also have a say.
The SCA’s Commercially Grounded Approach
The SCA adopted a pragmatic and balanced interpretation of Chapter 6:
- Post‑commencement creditors may have voting rights.
Where they hold a legitimate financial interest, excluding them would be irrational.
- Fairness and cooperation are central to business rescue.
The process is designed to rehabilitate companies, not entrench rigid hierarchies among creditors.
- Funding must be encouraged, not discouraged.
If new lenders are denied any influence over the rescue plan, fewer will be willing to provide the lifeline funding that business rescue often depends on.
Why This Judgment Matters
This decision has significant implications for practitioners, funders, and distressed companies:
- Greater certainty around the rights of post‑commencement creditors.
- Increased confidence for lenders considering emergency funding.
- A more commercially realistic rescue environment, aligned with the purpose of Chapter 6.
The SCA has effectively reinforced that business rescue must operate as a collaborative, economically sensible process.
The Bigger Lesson
Business rescue is intended to revive companies, not to create power struggles between creditor classes.
The Court’s message is clear:
If you contribute to keeping a distressed company alive, your voice should count.
This judgment strengthens the integrity of the business rescue framework and supports a more sustainable rescue culture in South Africa.
