On 7 October 2026, the Constitutional Court (“the Court”) delivered a unanimous judgment addressing a question on which the High Court and the Supreme Court of Appeal had reached opposite conclusions: whether post-commencement creditors are entitled to vote on the adoption of a business rescue plan. The Court held that they are not.

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 of South Africa upheld the appeals against the decision of the Supreme Court of Appeal and declared that Chapter 6 of the Companies Act 71 of 2008 (“the Act“) does not permit post-commencement creditors to vote on the adoption of a business rescue plan.

The Court emphasised that statutory interpretation cannot be approached by reference to dictionary meanings alone. Instead, the term “creditor” had to be interpreted in light of the text, context and purpose of Chapter 6 of the Act.

While acknowledging that business rescue proceedings do not create a concursus creditorum as in liquidation proceedings, the Court held that the business rescue framework is nonetheless built around a defined body of creditors whose claims existed when business rescue proceedings commenced.

The Court’s decision turned principally on the text and structure of Chapter 6 of the Act.

As a starting point, the Court held that section 145 of the Act only defines three categories of creditors: secured, unsecured and concurrent. This, together with the fact that the term “creditor” was left undefined in Chapter 6, led the Court to conclude that post-commencement creditors are not entitled to vote to adopt a business rescue plan.

The Court also rejected the argument that the reference to “each creditor” in section 145(2) of the Act, which confers the right to vote on a business rescue plan, extends that right to post-commencement creditors. It noted that section 145(1)(c) entitles creditors to participate formally in business rescue proceedings only “to the extent provided for” in Chapter 6, which allows for the possibility that not all creditors may vote. Voting interests are determined by reference to claims admitted or proved in the business rescue proceedings. The mere fact that a person appears in the company’s books as a creditor therefore does not, on its own, confer a right to vote on the plan.

In particular, section 150(2)(a)(ii) of the Act requires a business rescue plan to identify the company’s creditors when the business rescue began, together with details of their ranking in accordance with insolvency law. The Court considered this significant because it establishes a defined creditor body against which voting interests can be determined.

Importantly, the Act does not require post-commencement creditors to be identified in the business rescue plan, nor does it prescribe any mechanism for incorporating their claims into the statutory voting architecture. The Court considered this omission a deliberate choice by the Legislature, and one that leads to the ineluctable conclusion that post-commencement creditors do not get to vote on a business rescue plan.

Who gets a say?

A key aspect of the Court’s reasoning was the distinction between the rights afforded to pre-commencement creditors and the protections afforded to post-commencement financiers.

The Court found that granting post-commencement creditors both preferential repayment rights and voting rights would upset the carefully calibrated balance created by Chapter 6. Pre-commencement creditors are the parties whose claims stand to be compromised by a business rescue plan. By contrast, post-commencement financiers receive statutory protection in respect of the ranking of their claims and are not intended to participate in deciding whether such compromises should occur.

The judgment notes that, because of their enhanced security and preferential status, post-commencement financiers who were also entitled to vote would distort the collective decision-making of pre-commencement creditors in a manner not contemplated by the Act. The Court added that it would be inherently unfair for a creditor whose rights are not curtailed by the plan to vote on a plan that could deprive pre-commencement creditors, particularly unsecured creditors, of a substantial portion of their claims.

The Court emphasised that, even on its reading of the Act, post-commencement financiers remain incentivised to fund business rescue proceedings. Section 135 of the Act grants post-commencement financiers a statutory “super-preference” in respect of repayment. This enhanced protection exists precisely to encourage lenders, suppliers and other stakeholders to continue supporting a financially distressed company during business rescue. The Court viewed this preferential treatment as the legislative bargain struck by Chapter 6: protection through repayment priority rather than governance through voting rights.

Certainty, predictability and the financing trade-off

The Court was also persuaded by practical considerations. It held that allowing post-commencement creditors to vote would create uncertainty because the voting constituency could change as additional debts are incurred during the rescue process. This would make it difficult for business rescue practitioners to determine voting interests and assess whether the statutory voting thresholds had been met.

By limiting voting rights to creditors existing at the commencement of business rescue, the Act promotes certainty, predictability and the efficient administration of rescue proceedings. The Court considered these objectives central to the successful operation of the business rescue regime.

The implications for business rescue stakeholders

This judgment is the final word in the debate relating to the voting rights of post-commencement financiers.

It provides clarity for business rescue practitioners, existing creditors and potential post-commencement financiers, particularly when determining voting interests and during business rescue. There is no doubt that the judgment will shape restructuring and business rescue practice for years to come.

In particular, the judgment confirms that –

• the voting constituency on a business rescue plan is determined by reference to creditors existing when business rescue commenced;
• post-commencement creditors are not entitled to vote on the adoption of a business rescue plan, even though they are creditors of the company;
• while post-commencement creditors are not entitled to vote to adopt a business rescue plan, they are protected by other mechanisms, such as the statutory preference afforded by section 135 of the Act; and
• allowing post-commencement creditors to vote would undermine certainty and predictability in the business rescue process.

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A company in business rescue may be entirely dependent on revenue streams generated by an asset that is essential to the continuation of its business. But what happens where it is established that the asset belongs to a third party and the agreement under which the company was entitled to use the asset has already been cancelled?

This issue arose in Capitec Bank Ltd v Ubuntu Family Health Centre Grayston (Pty) Ltd [1], concerning a Porsche 911 Carrera S. Although the make of the vehicle makes the dispute particularly memorable, the underlying principle has broader application to businesses in rescue that rely on property they do not own.

Ubuntu acquired the Porsche pursuant to an instalment sale agreement financed by Capitec. In terms of the agreement, ownership of the vehicle remained with Capitec until Ubuntu had discharged all amounts owing. Following Ubuntu’s default, Capitec demanded payment of the outstanding arrears and, when those arrears remained unpaid, cancelled the agreement on 17 November 2023. Despite the cancellation, Ubuntu retained possession of the Porsche. Twelve days later, on 29 November 2023, Ubuntu adopted a resolution commencing business rescue proceedings. Capitec subsequently approached the court for the return of the vehicle.

The High Court dismissed Capitec’s application. It held that Ubuntu’s possession would be unlawful for purposes of the moratorium in section 133 of the Companies Act only if it involved conduct of a criminal nature, such as theft or fraud. Because Ubuntu had originally received the Porsche in terms of a lawful agreement, the High Court found that its possession remained lawful and where any attempt to recover the vehicle was prohibited by the application of the moratorium in business rescue proceedings.

The Supreme Court of Appeal (“SCA“) disagreed. How Ubuntu came to possess the vehicle was only part of the enquiry. The decisive question was whether Ubuntu still had a right to possess it, after the agreement had been cancelled. The cancellation was common cause and had taken place before business rescue commenced. Capitec remained the owner, and Ubuntu had no continuing legitimate right to keep the Porsche. Capitec could therefore seek its return without the business rescue practitioner’s consent.

The SCA was also clear that this result followed established law. Earlier decisions had already recognised that the moratorium does not prevent proceedings to recover property that a company in business rescue neither owns nor lawfully possesses. The High Court was bound by those decisions.

The commercial difficulty is easy to see, and where the decision can have far reaching effect. A rescue may depend on the ongoing use and possession of vehicles, equipment or premises held under agreements with third parties. Revenue generation might be entirely dependent on the continued and undisturbed possession of these assets. Losing access to one of them could place the entire company in jeopardy. Yet the importance of maintaining possession of an asset in a rescue scenario cannot trump the company’s contractual rights. Lawful possession which is established when an asset is delivered to the company, does not guarantee a right to keep it after the agreement is lawfully terminated.

A business rescue practitioner preparing a business rescue plan needs to clearly establish from the outset, which assets the company owns, which it holds under lawful agreements, and whether those agreements remain in force, post the commencement of the rescue process. The determination of the right to continue to lawfully use an essential asset is as important to the prospects of rescue, as the company’s financial projections and will, in certain instances, directly impact on the company’s ability to continue trading.

Owners of assets should be equally careful about the reach of the decision. Capitec’s ownership and the valid cancellation of Ubuntu’s agreement were not disputed. Where cancellation or a continuing right of possession is contested, the outcome for the parties will depend on the relevant agreement and the facts. Business rescue alone neither defeats an owner’s rights nor proves that an owner is entitled to its immediate return.

The SCA ordered Ubuntu to deliver the Porsche to Capitec. The question the judgment leaves for every proposed business rescue practitioner is a practical one: does the company have the legal right to continue to lawfully use the assets on which its plan depends? This analysis needs to happen upfront, and before events transpire that severely impact the company’s ability to continue trading.

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The notice is usually brief. Your customer has entered business rescue, a business rescue practitioner has been appointed, and creditors will shortly be invited to submit their claims.

What the notice does not tell you is whether you should stop supplying goods or services, what happens to the invoices already outstanding, whether you can cancel your supply contract, or whether the next order you fulfil will ever be paid.

Those decisions should not be deferred until the business rescue plan is published. By then, you may have supplied another month’s goods or services, missed an opportunity to exercise an important contractual right, or discovered that your claim has been recorded incorrectly.

When a customer enters business rescue, your unpaid account is only the beginning of the enquiry.

Business rescue a game changer for recovery

Business rescue is intended to rehabilitate a financially distressed company by temporarily placing it under the supervision of a business rescue practitioner and allowing a plan to be published and approved by affected persons. The plan may seek to preserve the company as a solvent business. Alternatively, it may propose a restructuring that achieves a better return for creditors than an immediate liquidation.

For creditors, one of the most significant consequences is the general moratorium under section 133 of the Companies Act 71 of 2008 applies. While the rescue continues, legal proceedings and enforcement action against the company, or in relation to property belonging to or lawfully possessed by it, generally cannot be commenced or continued without the practitioner’s written consent or the leave of the court.

The moratorium provides the company with breathing space. It does not extinguish your claim and it does not necessarily suspend your contractual rights.

A creditor exposed to a customer in business rescue may, depending on the circumstances, retain existing rights allowing it to enforce against security held, such as a cession of debtors, a notarial bond registered against the company’s moveable assets or a mortgage bond registered against immovable property. In addition, a suretyship, the application of set-off, reservation of ownership of goods or a valid right to cancel an agreement will have to be considered if applicable. The Supreme Court of Appeal has confirmed that cancellation of an agreement does not, without more, constitute enforcement action prohibited by section 133. However, the existence and proper exercise of a right to cancel must still be considered against the terms of the relevant contract and the facts.

The critical point is that the words “business rescue” should not result in immediate action or complete inaction. Legal advice should be taken so that rights are not waived or squandered.

Distinguish the old debt from the next order (continuation of trade)

Claiming an existing outstanding amount owed when business rescue commenced and any new exposure incurred subsequent to the commencement of business rescue (post commencement debt), have different legal consequences.

The pre-rescue claim must be reconciled as at the commencement date of business rescue. Invoices should be checked against payments, credit notes, delivery records and any existing disputes relevant to the supply of goods and services. The claim should then be submitted to the practitioner with the relevant agreements and documentation supporting the claim.

It is equally important to establish the manner in which the practitioner has classified the claim. A creditor holding security, relying on a reservation of ownership clause or a third-party suretyship, may be in a materially different position from an ordinary concurrent creditor. Claims must be accurately recorded when submitted for proof to the practitioner, as it can affect the proposed treatment of the claim and the creditor’s voting interest.

Then comes the more difficult question: should you continue trading with the company?

Business rescue does not automatically release either party from rights recorded in an existing contract of supply. Section 136 also gives the practitioner certain powers to suspend or cancel contractual obligations of the company, subject to the provisions of the Company’s Act. A supplier or service provider should therefore not assume that it may simply stop performing. The ability to do so depends on the terms of the agreement, any existing breach and the steps taken by the practitioner.

At the same time, there is no commercial sense in continuing to supply goods and services to a company in business rescue or allowing further credit to accumulate without considering the prospects of receiving payment. Careful consideration must be given to the following issues –

• Who has authorised the further work or supply of goods and services?
• Is such supply in terms of an existing agreement?
• Has the practitioner approved it?
• From what funds will the new invoices be paid?
• Can payment be made in advance, on a cash basis, on delivery or against agreed milestones?
• What protection is available if the company defaults again?

Whatever occurs should be recorded in writing and where the rights of the party providing the goods and services are carefully dealt with. Claims arising after date of commencement (are deemed to be post-commencement finance) and may be treated (with the written consent of the practitioner) differently from pre-rescue debt, but that does not mean every new invoice automatically enjoys priority or is guaranteed to be paid.

Treat the rescue plan as an investment proposal

The practitioner must convene the first meeting of creditors within 10 business days of appointment and advise whether there is a belief that there is a reasonable prospect of rescuing the company. The business rescue plan must ordinarily be published within 25 business days of the practitioner’s appointment, unless the required extension is obtained. Generally, business rescue plans are published some months after the date of commencement of the rescue, provided the consent of creditors for an extension has been obtained by the practitioner.

When the plan is published, one should not only focus only on the proposed dividend to be paid on the outstanding debt. A promise to pay 60 cents (for example) in the rand is not meaningful without understanding the mechanics of the business rescue plan. Firstly, one has to consider if the plan is workable and whether it will be approved by creditors. Secondly, when will the payment be made and where will the money come from. Is the proposal dependent on the sale of an asset, a new investor, litigation proceeds or improved future trading? Has funding been secured, or is it merely anticipated? What happens if the transaction is delayed or the assumptions prove incorrect?

The plan should also compare the proposed business rescue outcome with the estimated return in liquidation. That comparison must be considered critically. A rescue proposal should not be supported merely because it produces a higher percentage on paper. The proposed return must be credible, properly funded and achievable within a commercially acceptable period.

Once the business rescue plan has been published, creditors are entitled to participate, by asking questions and proposing amendments to the plan. This matters because an adopted plan binds creditors regardless of whether they attended the meeting, voted against it or proved their claims.

Silence is therefore not a neutral position and can have consequences.

Remain informed and act timeously

The business rescue process can be complex, and one needs to act on an informed basis before it is too late. On receiving a business rescue notice, establish the commencement date of the rescue process, quantify the exposure and review the relevant underlying contracts. In addition, it is necessary to review existing supply agreements, identify your claim and any security held, review supporting documentation (such as invoices, credit notes), suretyships held, and any rights of reservation in goods supplied. Importantly, has the filing for rescue breached any ongoing rights to supply goods and services. Take legal advice so that no mistakes are made in the process.

Most importantly, decide whether further trade remains commercially viable and, if so, on what terms. Engage with the practitioner before the plan is put to a vote.

The correct response will depend on the size and nature of the pre-commencement claim, the importance of the ongoing relationship with the company in the future, and the rights contained in the relevant supply agreements.

What should remain consistent is the timing. The best opportunity to take legal advice in order to protect a creditor’s position is often at the commencement of the rescue. Advice should be taken before further exposure is incurred and before the proposed treatment of the claim becomes embedded and approved in the plan.

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The sixth edition of the LEX Africa Insolvency and Business Restructuring Guide for Africa brings together an overview of insolvency and restructuring frameworks across 32 African jurisdictions. The guide is intended to provide businesses, investors, financial institutions and advisers with a better understanding of the approaches to insolvency, restructuring and distressed situations in different African markets.

Eric Levenstein contributed the South African chapter, which covers the key features of South Africa’s insolvency and restructuring framework, including the tests for insolvency and financial distress, liquidation, business rescue and compromises with creditors. It also addresses the treatment of creditors, employees and contracts, post-commencement finance, security and enforcement, and the recognition of foreign judgments and foreign insolvency practitioners.

Download the guide here.

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Dr Eric Levenstein unpacks the legal significance of recent successes in the business rescue space and explains why successful business rescues are an important contributor to the South African economy and where recent outcomes positively reflect the maturity of the South African business rescue framework.

Recent statistics published by StatsSA show that 225 companies were placed into liquidation in May 2026. In 2026 alone, 1116 companies have had their businesses terminated by the filing for liquidation, with the knock on effect of job losses and the closure of what were historically (for some years) sustainable and viable trading entities.

Many of these companies would have been financially distressed/insolvent for a significant period of time and where the possible rescue and restructuring of historical debt and the businesses of these companies were just left too late, and where a possible business rescue mechanism was just not considered early enough in the distressed time line of the company. The default position in these instances would be liquidation.

Liquidation unfortunately remains a very negative outcome for distressed companies in South Africa, and where we at Werksmans continue to advocate for the restructuring alternative of business rescue as a viable and workable alternative to the liquidation process.

It is vitally important that we speak (at every opportunity) about notable successes in the business rescue space and in order to ensure that we bolster and retain confidence in the business rescue mechanism which can allow for positive outcomes; namely to facilitate the rehabilitation and restructuring of a company in a manner that allows it to continue operating on a solvent basis, or failing that; to achieve a better return for creditors than what would be available in the event of the immediate liquidation of the company.

Werksmans Attorneys has been involved in two very high profile business rescue successes both of which were finalised last week and where the positive outcomes flowing from these rescues have no doubt reflected the effectiveness of the South Africa’s business rescue framework. So after 15 years since we first got our Business Rescue legislation in 2011, one needs to pause and take stock and ask oneself the important question –

Is South Africa’s business rescue framework finally coming of age?

Last week saw two significant milestones in South African business rescue. Murray & Roberts reached a major implementation milestone with the completion of its R1.27 billion Differential Capital transaction, securing approximately 2,600 jobs and preserving critical mining services businesses. At the same time, Group Five formally concluded its business rescue process after more than six years, with all secured, preferent and concurrent creditors paid in full or fully provided for, while preserving the vast majority of jobs and potentially even delivering a return to shareholders.

Together, these outcomes raise important questions about how business rescue is evolving in South Africa. Do these outcomes demonstrate that the business rescue regime is achieving what it was intended to do? What lessons can other distressed companies, lenders and investors draw from these restructurings? And what do these successes mean for confidence in South Africa’s corporate restructuring environment?

In principle, business rescue, if embraced and used at an early stage of distress, is a powerful and necessary tool for struggling companies. In many cases, by the time business rescue is considered, unfortunately, the business is no longer capable of being rescued. It is a mechanism built for intervention – not reaction –  business rescue is designed to operate at the point of financial distress, not financial collapse.

Rather than face the inevitable collapse into liquidation, if stakeholders support the business rescue practitioner and his/her efforts to restructure the debt, the companies’ workforce and its contracts in a manner that makes the business more effective and more profitable, there is no reason why the company cannot exit from its business rescue process with a credible, practical and workable plan, and where outcomes can be really good for all stakeholders. Either the company is restructured in a way that allows it to continue trading, or there is a wind down/sell off of the businesses/subsidiaries of the company to third parties which supports a financial distribution to creditors, and in some instances to shareholders, far better than one would ever have seen in a liquidation.

For the business rescue practitioner, he/she must carefully consider the requirement of the “reasonable prospect of rescue”. It requires a credible, supportable basis on which the company can be rehabilitated, whether through operational restructuring, the introduction of new capital, or a compromise with creditors. It is not satisfied by the mere hope that conditions might improve. It is up to the business rescue practitioner to persuade all stakeholders that if all parties work together, and where the business rescue plan is supported,  companies can be saved.

Looking at the outcome in Murray & Roberts and Group 5, the results speak for themselves.

Murray & Roberts

In one of the most significant corporate restructurings in recent South African history, Differential Capital Proprietary Limited and its consortium of investors, working with the company’s business rescue practitioners (Metis Strategic Advisors), concluded a transaction resulting in the acquisition of the equity of the mining division of Murray & Roberts Limited (in business rescue) for R1.27 billion.

The adopted business rescue plan gained 100% creditor approval in April 2026 and the transaction, which completed on 25 June 2026, secured the transfer of numerous local and foreign subsidiaries (in South Africa, Canada, Australia, Portugal, Chile and numerous other jurisdictions) to the Differential Capital-led consortium. The sale enables the business rescue practitioners to settle all secured debt and funding obligations. Importantly, the transaction preserves approximately 2,600 jobs and safeguards vital mining capabilities that will continue to contribute meaningfully to the South African economy.

Group 5  

In Group 5, the business rescue practitioners (Metis Strategic Advisors) of Group Five Limited and Group Five Construction Proprietary Limited (“Group Five“), announced last week the substantial implementation of their respective business rescue plans and which has now concluded their business rescue proceedings.

In March 2019, Group Five collapsed into business rescue with approximately R7 billion in creditor and contingent exposures, more than 2300 individual creditors, 119 active construction projects and close to 6000 employees employed in approximately 180 companies across 38 countries. At the time, it was estimated that an immediate liquidation of Group Five would result in secured creditors receiving as little as 65 cents in the Rand, and concurrent creditors no more than 3.4 cents in the Rand, not to mention the devastating impact that a liquidation would have on employment and the construction industry generally. At that time, there was no prospect for any shareholder recovery.

Group Five’s business rescue proceedings took the form of a structured wind down, with projects being completed, debtors being recovered, and key subsidiaries such as Intertoll Europe and Everite, being sold as going concerns. Over 60 entities and asset sales were completed within the business rescue process, and where a substantial number of jobs were retained.

As Dave Lake from Metis put it: “the process has over-achieved in its primary objectives:  maximising recoveries for creditors and lenders, saving jobs, and business entities, settling tax obligations, unlocking some value for shareholders, while stabilising and restructuring a highly complex group in an orderly manner“.

Various issues in the administration of the business rescue proceedings were dealt with, including resolution of litigation with certain shareholders, resolution of various creditors’ claims, as well as attending to other commercial aspects, which included the conclusion of financing agreements, and the disposal of Group Five’s subsidiaries and/or businesses.

In what is an incredible success story for business rescue in South Africa, not only have all creditors, including concurrent creditors, been paid in full (100 cents in the Rand), but it is expected that a surplus return will be delivered to shareholders as well. This is an exceptional outcome for a business rescue process.

In summary

The value of business rescue as a mechanism in South Africa cannot be ignored. Where it is used as the statute intended, it remains a workable option for a proactive and well-considered restructuring strategy. Business rescue remains one of the most effective mechanisms for preserving value in the South African economy and provides a structured framework within which businesses can reorganise, negotiate with stakeholders and, where necessary, compromise debts and gain access to new capital.

So, as we have seen in the Murray & Roberts and Group 5 examples, business rescue can work – it is a robust and effective mechanism focused on saving South African companies from complete financial and operational collapse.

It is hoped that in time to come, we will see more and more companies exit from business rescue on a similar basis, with job preservation being key and where companies (either as restructured or with new owners) can continue to contribute to the South African economy in a positive and meaningfully way.

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Business rescue has become a cornerstone of South African corporate insolvency law. Introduced by Chapter 6 of the Companies Act 71 of 2008 (“the Act”), it seeks to rehabilitate financially distressed companies while preserving value for creditors, employees and shareholders. For creditors seeking to place a company under supervision, boards of distressed entities may try to obstruct the process, which runs the risk of undermining the purpose of business rescue proceedings.

A recent judgment of the North West Division of the High Court provides important guidance on two deceptively simple but significant questions: when does voluntary business rescue actually commence, and can a voluntary business rescue be used to thwart a pending compulsory business rescue application? The judgment provides welcome certainty for creditors and reinforce the integrity of South Africa’s business rescue framework.

Zizwe Open Cast Mining Proprietary Limited (“Zizwe“) rendered contract mining services to Lethabo Minerals Proprietary Limited (“Lethabo“), a holder of a mining right over a chrome mine near Rustenburg. Following the termination of their commercial relationship, Lethabo acknowledged that there was a substantial debt owing to Zizwe that remained unpaid. Zizwe instituted an urgent compulsory business rescue application under section 131(1) of the Act.

Lethabo filed an answering affidavit that was conspicuously limited in scope. The answering affidavit failed to dispute either the indebtedness or its quantum and produced no financial information demonstrating solvency or a viable path to recovery. Furthermore, Lethabo did not (at that stage) take issue with either the qualifications or the independence of the business rescue practitioner nominated by Zizwe.

Shortly before the hearing, Lethabo informed both Zizwe and the Court that Lethabo’s board had adopted a written resolution two days prior to the hearing voluntarily commencing business rescue proceedings. Lethabo stated that the requisite CoR123.1 form had been lodged with the Companies and Intellectual property Commission (“CIPC“), thereby commencing business rescue proceedings by operation of law and rendering Zizwe’s application moot.

Section 129 of the Act permits a company’s board to resolve to commence voluntary business rescue where the company is financially distressed and there is a reasonable prospect of rescuing it. The resolution must, however, be filed with the CIPC, together with the prescribed notices and supporting documentation.

First mover advantage

The first substantive issue before the Court was whether the mere electronic submission of documents to the CIPC constitutes “filing” for purposes of section 129 of the Act. At the time of the commencement of the hearing, Lethabo had uploaded the relevant documents electronically, but the CIPC had not yet reviewed, accepted or confirmed the filing. Formal confirmation from the CIPC was only issued during the course of the hearing.

In terms of section 132(1) of the Act, business rescue proceedings commence either when (1) a company files a resolution to place itself under supervision in terms of section 129(3) of the Act or (2) an affected person applies to court for an order placing the company under supervision in terms of section 131(1). In relation to the latter instance, previous court decisions have held that in order for a compulsory business rescue application to be made, the application must be issued by the Registrar, served on the company and CIPC, and that affected persons are notified.

Zizwe’s counsel argued that Chapter 6 of the Act prohibits a board from passing a voluntary business rescue resolution as contemplated in terms of section 129 once a compulsory application is made. While the Court did not agree with this contention, it did accept that the Act does not permit parallel business rescue processes. Instead, the commencement date of business rescue proceedings is critical because it informs the date of inception of the moratorium, the practitioner’s authority and the rights of creditors.

Section 129(2)(b) of the Act sets out that a board resolution to commence business rescue is of no force and effect until it has been filed with the CIPC. In this regard, CIPC Practice Note 3 of 2021 was issued in terms of regulation 4 of the Regulations to the Act, which confirms that the date of filing of business rescue will be the date that the relevant information is confirmed as correct by a member of the CIPC team. Furthermore, a confirmation letter from the CIPC is required before a voluntary business rescue resolution can be considered filed, within the meaning of section 129(2)(b). In this case, the CIPC certificate of confirmation was only forthcoming during the hearing, and clearly indicated a commencement date subsequent to the date on which Zizwe’s compulsory business rescue application was made.

Tactical or abusive?

The Court considered whether the manner in which Lethabo’s board acted constituted an abuse of the business rescue procedure. In circumstances where Lethabo’s board had been aware of the pending business rescue application for at least two weeks prior to the hearing, and where Lethabo’s answering affidavit did not mention any intention to pursue voluntary business rescue or an objection to Zizwe’s nominated practitioner, the Court was unsurprisingly critical of Lethabo’s conduct.

The Court found this conduct constituted an abuse of process: the resolution was adopted not in genuine pursuit of rehabilitation, but as a tactical manoeuvre to retain control over the identity of the business rescue practitioner and to derail the court-driven proceedings. As such, the Court held that it was just and equitable to set aside the resolution commencing the business rescue proceedings.

Conclusion

The judgment has several practical implications. First, boards of directors creditors should not assume that a board resolution or proof of electronic submission is sufficient to commence business rescue proceedings. They should verify that the CIPC has formally accepted and confirmed the filing. Second, boards seeking to secure a tactical advantage by adopting a resolution to thwart a compulsory business rescue application must understand that this is a high risk and low reward strategy. Third, the judgment confirms that Chapter 6 is not a tactical instrument: directors who invoke it for purposes other than genuine rehabilitation expose themselves to adverse findings.

Ultimately, this decision reinforces the procedural integrity of business rescue, while providing much-needed certainty for creditors, companies and practitioners alike.

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Business rescue was introduced as a mechanism to rehabilitate financially distressed companies and preserve value. In practice, however, it is often invoked only once liquidation is imminent. This article considers how the defensive use of business rescue, rather than its application as a proactive restructuring tool, materially undermines its prospects of success, with many processes effectively constrained before they begin.

Chapter 6 of the Companies Act 71 of 2008 introduced business rescue as a mechanism to rehabilitate financially distressed companies. Its purpose is clear, to facilitate the restructuring of a company in a manner that allows it to continue operating on a solvent basis or, failing that, to achieve a better return for creditors than immediate liquidation.

In principle, it is a powerful and necessary tool for struggling companies. In practice, however, its effectiveness is often undermined by the circumstances in which it is invoked.

In many cases, by the time business rescue is considered, the business is no longer capable of being rescued. A mechanism built for intervention – not reaction – business rescue is designed to operate at the point of financial distress, not financial collapse.

The statutory framework assumes that, while the company is under pressure, it retains sufficient operational substance and stakeholder confidence to support a restructuring process. The moratorium on creditor claims is not an end in itself; it is a tool to create space within which a viable business rescue plan can be developed and implemented.

Central to this framework is the requirement of the “reasonable prospect of rescue”. This is a substantive threshold. It requires a credible, supportable basis on which the company can be rehabilitated, whether through operational restructuring, the introduction of new capital, or a compromise with creditors. It is not satisfied by the mere hope that conditions might improve.

In the current economic environment, that threshold is increasingly difficult to meet. South African businesses are operating under sustained pressure: elevated interest rates, constrained demand, rising input costs and ongoing infrastructure challenges. In this context, financial distress is often prolonged rather than sudden. Businesses absorb pressure for as long as possible, drawing on facilities, extending creditor terms and reducing internal buffers, while the inevitable is looming.

By the time formal proceedings are considered, the position has often materially deteriorated. Business rescue is therefore frequently initiated not as part of a restructuring strategy, but as a response to imminent liquidation. Its immediate function becomes the moratorium – a means of halting enforcement action and stabilising the position.

This is a fundamental shift. A process intended to enable restructuring becomes, in effect, a defensive measure. Where business rescue is invoked in these circumstances, a critical element is often missing: a realistic pathway to rehabilitation.

The underlying business may no longer be viable on any sustainable basis. Liquidity may be exhausted. Access to additional funding (including post-commencement finance) may be limited or unavailable. Creditor relationships may already be compromised. In these conditions, the business rescue practitioner is required to formulate a restructuring plan within a set of constraints that materially limit its prospects of success.

Where business rescue is initiated early and while the business still retains operational stability, there is scope to intervene meaningfully. Funding can be secured, cost structures adjusted and stakeholder support mobilised. The process functions as intended. Where it is initiated at the point of imminent liquidation, the position is fundamentally different. At that stage, the process becomes a futile exercise, and where the restructuring of the business is left with minimal options. The business rescue practitioner then has the unenviable task of managing a business that has largely exhausted any possibility of it being successfully restructured. Value erosion has already occurred, and the ability to reverse such erosion is limited.

The distinction between those two scenarios is often the difference between a viable business rescue and an inevitable failure.

The defensive use of business rescue also shapes stakeholder behaviour. Creditors are increasingly attuned to proceedings that appear to have been initiated to delay enforcement. Where confidence in the underlying viability of the business is limited, support by stakeholders for the proposed business rescue plan is correspondingly weak.

Funders adopt a similarly cautious approach. Post-commencement finance is, by its nature, risk capital (and often unsecured). It is unlikely to be made available in circumstances where there is no clear and credible restructuring thesis. Without stakeholder alignment, the process becomes self-limiting.

These dynamics are amplified by the current economic environment. Recent increases in input costs (fuel crises) have placed sustained pressure on margins across multiple sectors. At the same time, constrained consumer demand has limited the ability of businesses to pass those costs through. The result is a gradual erosion of profitability and liquidity.

Importantly, this erosion is often not immediately visible. Businesses continue to trade, but with reduced financial flexibility and increasing reliance on short-term measures. It is within this environment that business rescue is increasingly being invoked, not at the point of manageable distress, but at the point where that accumulated pressure becomes unsustainable.

None of this detracts from the value of business rescue as a mechanism. Where it is used as the statute intended, it remains a workable option for a proactive and well-considered restructuring strategy. Business rescue remains one of the most effective mechanisms for preserving value in the South African economy and provides a structured framework within which businesses can reorganise, negotiate with stakeholders and, where necessary, compromise debts and gain access to new capital.

The issue is not the tool. It is the timing and purpose of its use.

Business rescue is too often positioned as a last line of defence. In doing so, it is expected to resolve circumstances that have already progressed beyond the point at which meaningful and successful intervention is possible.

The question is not whether business rescue works. The statutory framework is clear, and where properly applied, it is effective. The question is whether it is being used in the way contemplated by Chapter 6.

When business rescue is deployed as a defence to liquidation, or to frustrate creditors rather than as a considered restructuring mechanism, its prospects of success are inherently limited. In that sense, many business rescues do not fail because the process is flawed. They fail because, by the time they begin, the outcome is already largely determined.

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As South African companies continue to suffer from an ailing economy, and where we are seeing an increasing number of companies filing for liquidation, there is no doubt that the role and impact of the Chief Restructuring Officer (CRO) cannot be ignored.

Recent statistics released by STATS SA, confirm that 233 companies were placed into liquidation in April of this year. In 2026 alone, 891 companies have met their demise through a liquidation process. The University of Stellenbosch’s Bureau for Economic Research (BER) reported this week that the business confidence index had dropped by eight percentage points directly attributable to the price cost impact brought about by the ongoing middle east conflict. According to BER, falling confidence is a warning signal that the economy is losing momentum.

The knee-jerk rush to file for a formal business rescue process needs to be carefully considered by the boards of stressed companies. Proper consideration should first be given to the appointment of a CRO as opposed to a business rescue practitioner. This allows a CRO to take a fresh look at the business and to offer effective turnaround strategies.

Of course it will always come down to ”horses for courses” as financial pressure on the entity might be too great, requiring an urgent filing for business rescue and where the benefit of a moratorium on claims against the company provides the required breathing space needed in the restructuring process. The default position is of course a filing for liquidation, which effectively ends the life of the company with subsequent job losses and cessation of trade.

But it takes a brave director to be able to recognize a decline of the company into the abyss of financial disaster. The last thing that would be high on the board’s agenda in a cash strapped entity would be to admit a potential slide towards business failure and where they would just hold up their hands and actively look for the outside assistance of an independent supervisor, such as a CRO.

Board members of failing companies need to accept that the slow slide towards financial distress is often as a consequence of their own limited management skills in being able to trade the entity out of its financial distress. Often the fear of failure and where directors, not used to making unpopular and difficult decisions, place themselves into a proverbial “rabbit in the headlight” scenario and which makes the need for the appointment of an independent turnaround consultant even more necessary.

The risk of personal liability and opening oneself up to scrutiny by creditors after the company has filed for insolvency, should persuade directors to engage a CRO as early as possible.

A CRO would have as an objective the restructuring of the affairs and business of the company, so as to ensure that the entity can continue to trade into the future on a solvent and effective basis. To do this, the CRO needs to remain independent and do his best to make the hard decisions for the commercial benefit of the operation. The achievement of stability, being able to trade profitably, without ongoing decline are the objectives for the CRO.

A restructuring led by a CRO is aimed at delivering an entity back into the market with its debt restructured, operational and financial changes having been made, with cash burn being reduced, with prejudicial contracts renegotiated, or terminated, and with management and employees realigned to upscale business profits and upside for shareholders and stakeholders. The objective must be to maximise the returns for lenders and creditors faced with the potential fallout of massive debt write offs in the event that these companies file for business rescue or liquidation.

In the recent RT Global CRO Study (March 2026), “The CRO in Transition – Restructuring that Creates (More) Value”, conducted together with the renowned IFUS-Institute in Europe, submissions were made in support of the CRO restructuring option. RT Global submitted that ” in many crisis situations, the CRO is still brought in as a “firefighter”, far too late, and in an environment already shaped by political dynamics, and with the CRO having limited decision-making authority.”

RT Global were of the view that “the CRO office, with clear governance and real executive authority, is becoming the international standard in restructuring. The CRO mandate determines whether restructuring remains an issue of damage control – or becomes a strategic leadership tool.”

In order for South African corporates to consider the clear advantages in appointing CRO’s in failing entities, it is clear that the CRO must be brought in as early as possible and prior to significant damage having impacted the business and its ability to trade out of decline. This requires a change in mindset and where directors and management need to be mature enough to recognize the need for intervention and supervision and to do so as early as possible.

CRO’s must be given clear and concise mandates and with the required milestones in place. Targets for the achievement of both operational and financial turnaround must be set up front, so that all stakeholders are on the same page from day one.

Realistic outcomes must happen within as short a timeframe as possible, so that the turnaround can be given the best possible chance to succeed.

For South African corporates, agility in distressed situations must be a top priority and particularly so in volatile and uncertain times. The appointment of a competent CRO, that has the ability to create stability and a workable turnaround for the company must bode well for distressed companies and for the South African economy.

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The Gauteng High Court, Johannesburg, has delivered an important judgment in White Rivers Exploration Proprietary Limited v Polsun Limited, reaffirming the power of an adopted business rescue plan to fundamentally reshape a company’s equity structure. The decision will be of interest not only to business rescue practitioners, but also to lenders, investors and shareholders involved in distressed restructurings.

At its core, this case concerned a familiar commercial problem. A financially distressed company required fresh capital if it was to survive, which solution was not simply an operational turnaround or a compromise of debt. It was a full recapitalisation: all of the existing issued shares were to be cancelled and new shares issued to an incoming investor as part of the rescue funding package. The Court described this mechanism as lying “at the very heart of the restructuring” and as the commercial quid pro quo for the capital required to rescue the company.

In practice, distressed capital is often only available if the investor can enter on a clean equity footing. The judgment acknowledges that reality. Business rescue, on this approach, is not confined to preserving an existing shareholding structure while adjusting debt around the edges. It can, where the circumstances justify it, become the vehicle for a complete reset of ownership.

White Rivers Exploration (“WRE”) was placed into business rescue on 6 January 2023 by board resolution in terms of section 129(1) of the Companies Act 71 of 2008 (“2008 Companies Act”). A business rescue plan was subsequently adopted in April 2023 with the requisite statutory majorities from bother creditors and shareholders. The business rescue plan provided for an immediate capital injection of £300 000 and, critically, for a full recapitalisation of the company through the cancellation of all existing shares and the allotment and issue of 100 new ordinary shares to Lexington Gold South Africa. The business rescue plan was implemented, and a notice of substantial implementation was filed, resulting in the termination of the business rescue proceedings.

Polsun, a foreign minority shareholder WRE, sought to challenge the completed restructuring. It contended that the cancellation of its shares pursuant to the adopted and implemented business rescue plan was unlawful and unconstitutional, relying on section 25 of the Constitution. Polsun further sought to set aside the business rescue proceedings and to have its prior shareholding reinstated, effectively requiring the Court to unwind a fully implemented and terminated business rescue almost two years after the substantial implementation.

In an application for security for costs brought by WRE, the Court rejected that challenge and held that Polsun chances of success were slim. It held, first, that section 137 of the 2008 Companies Act, read together with section 152(6), expressly authorises a business rescue practitioner to cancel shares in accordance with an adopted business rescue plan. This is significant because it confirms that the power to alter securities, including an equity wipe-out and reissue, is firmly grounded in the statutory framework of Chapter 6 of the 2008 Companies Act, rather than being treated as an incidental or implied power.

Secondly, the Court reaffirmed the binding force of an adopted business rescue plan. Once the requisite statutory majorities have been obtained and the plan has been adopted, section 152(4) of 2008 Companies Act renders it binding on the company and all affected persons, whether or not they supported it. The judgment further situates this within a foundational principle of company law, namely that a shareholder (especially a minority shareholder) accepts that validly constituted majority decisions may prevail notwithstanding any adverse impact on their rights.

Thirdly, the Court rejected the constitutional attack. The complaint was not simply that Polsun had lost an asset. The issue was whether that deprivation was arbitrary. The Court held that the challenge based on section 25(1) of the Constitution could not succeed in light of section 137 of the 2008 Companies Act and the statutory scheme in Chapter 6. Put differently, where securities are altered pursuant to a law of general application and in accordance with a duly adopted business rescue plan, a constitutional challenge of this nature is unlikely to succeed absent an attack on the empowering legislation (being s 137 in this particular case).

Perhaps the most commercially significant aspect of the judgment is its treatment of finality. The Court emphasised that once a plan has been implemented and a notice of substantial implementation has been filed, business rescue terminates by operation of law under sections 132(2)(c)(ii) and 132(2)(b) of the 2008 Companies Act. At that stage, there is no longer an extant business rescue to set aside, and the completed process is not susceptible to retrospective undoing. That is a critical message for investors and creditors. Rescue transactions depend on certainty. If implemented plans could later be unravelled with ease, the willingness of third parties to fund distressed companies would be materially undermined.

The judgment also illustrates that procedure remains decisive in business rescue litigation. The Court held that Polsun’s failure to join interested shareholders and creditors was fatal. It also criticised the attempt to rely on section 172(1)(a) of the Constitution without engaging the remedial framework in section 172(1)(b), particularly given that the rescue process had already been fully implemented and time had passed before the institution of the main application.

Although the case arose in the context of an application for security for costs, the Court’s assessment of Polsun’s prospects makes the broader lesson clear. Business rescue under Chapter 6 of the 2008 Companies Act is a structured, sequential and collective process. It is designed to facilitate rehabilitation or a better return for creditors than immediate liquidation. That purpose would be frustrated if dissenting shareholders could revisit an implemented plan long after the rescue has concluded.

The decision confirms that business rescue is not just about restructuring debt or preserving existing arrangements. It can also reset ownership and control through recapitalisation, as long as the statutory process is properly followed.

For professionals in the restructuring and insolvency space, White Rivers Exploration v Polsun highlights two key points. First, equity is not protected in business rescue. Second, once a plan has been properly adopted and implemented, it is final. That finality is not just procedural but it provides the commercial certainty needed to support business rescue funding.

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A recent judgment handed down by Nyathi J in Maralco Business Advisors CC t/a Maralco Plant Services v GMK Civils Proprietary Limited [1], serves as an important reminder that liquidation proceedings are not a debt-collection mechanism where the underlying indebtedness is genuinely disputed.

The matter concerned an application for the final winding-up of GMK Civils Proprietary Limited on the basis that the company was allegedly unable to pay its debts as contemplated in section 344(f), read with section 345(1)(c), of the Companies Act 61 of 1973. The applicant alleged that the respondent was indebted to it in the amount of R817 994.50 arising from a plant rental facility allegedly concluded on a thirty-day basis and supported by a certificate of balance.

The respondent opposed the application on several grounds. Central to its defence was that its sole director neither concluded nor authorised the alleged facility agreement relied upon by the applicant. The respondent further contended that, even on the applicant’s own version, the alleged agreement was void for uncertainty because it failed to record an essential term, namely the rental rates or a mechanism by which such rental rates could be determined. On this basis, the respondent argued that the invoices relied upon by the applicant could not establish the indebtedness alleged.

The Court ultimately dismissed the winding-up application with costs, reaffirming the long-established principle set out in Badenhorst v Northern Construction Enterprises Proprietary Limited [2], namely that liquidation proceedings should not be used to enforce payment of a debt that is bona fide disputed on reasonable grounds.

Importantly, Nyathi J did not merely accept a generic allegation of dispute. The Court carefully analysed the nature of the disputes raised and found that they constituted substantive contractual disputes incapable of proper determination in motion proceedings seeking liquidation relief.

The applicant relied heavily on a certificate of balance clause as prima facie proof of indebtedness. However, the Court drew an important distinction between proof of indebtedness and proof of liability itself. Nyathi J held that while a certificate of balance may constitute prima facie proof according to its terms, it cannot conclusively establish liability where the validity and enforceability of the underlying agreement are themselves credibly challenged.

In particularly strong language, the Court held that “a certificate cannot bootstrap validity”. This is a significant statement for commercial litigants and insolvency practitioners alike. Certificate of balance clauses are routinely relied upon in commercial litigation and insolvency proceedings, particularly in matters involving facilities, running accounts, or credit agreements. The judgment makes it clear that the evidentiary value of a certificate remains dependent on the existence of a valid contractual foundation.

The Court further held that the respondent had raised a bona fide dispute on reasonable grounds regarding both authority and certainty of essential terms. In relation to authority, the respondent’s sole director squarely denied signing or authorising the agreement. Although the applicant argued that the documents emanated from the respondent’s offices, that services had been rendered and accepted, and that part-payments had been made from time to time, the Court held that these considerations did not permit the respondent’s version to be rejected on the papers.

Nyathi J specifically referred to the principles set out in Plascon-Evans Paints Ltd v Van Riebeeck Paints [3] and held that the respondent’s version could not be rejected as far-fetched or untenable.

The Court also rejected the applicant’s reliance on section 20(7) of the Companies Act 71 of 2008, which permits a person dealing with a company in good faith to presume that the company has complied with all formal and procedural requirements. While the Court accepted that this may be a relevant consideration at the level of “commercial probability”, it nevertheless found that the issue of authority remained genuinely disputed on the papers.

Equally significant was the Court’s treatment of vagueness and certainty of contractual terms. The respondent argued that the alleged agreement failed to specify either a fixed rental amount or an ascertainable mechanism by which the rental could be determined. The Court found that this was not a contrived defence. Instead, it constituted “a substantive contractual contest unsuited to motion liquidation proceedings”.

The judgment repeatedly emphasises the limited role of winding-up proceedings in the resolution of contractual disputes. Nyathi J noted that winding-up proceedings are not designed to resolve material disputes concerning the existence of indebtedness and reaffirmed that where a debt is bona fide disputed on reasonable grounds, the creditor’s remedy lies in action proceedings.

Perhaps the most striking passage in the judgment appears in paragraph 19, where the Court stated that contested issues of authority, contract formation, and essential terms should be ventilated by way of action proceedings “with oral evidence and discovery, not the blunt instrument of corporate death by winding-up”.

That phrase captures the policy rationale underpinning the Badenhorst principle. Liquidation proceedings carry severe commercial consequences and are not intended to operate as procedural leverage in ordinary commercial disputes.

Notably, however, the Court stopped short of criticising the applicant’s conduct as abusive or vexatious. Nyathi J accepted that the applicant had relied on a documentary trail, invoices, and a certificate of balance, “often invoked in commerce”. The Court accordingly refused to grant punitive costs and instead ordered costs on the ordinary party-and-party scale.

The judgment serves as a timely reminder that creditors considering liquidation proceedings must carefully assess the underlying contractual foundation of their claims before invoking the insolvency process. Disputes relating to authority, contract formation, certainty of essential terms, or enforceability may well render liquidation proceedings inappropriate, even where invoices have been rendered, services performed, and partial payments made.

For insolvency practitioners and commercial litigants alike, the judgment is a reaffirmation that the Badenhorst principle remains firmly embedded in South African insolvency law, and that the courts will continue to guard against the use of winding-up proceedings as a substitute for ordinary action proceedings.

[1] Maralco Business Advisors CC t/a Maralco Plant Services v GMK Civils (Pty) Ltd (2026) ZAGPPHC (20 April 2026).

[2] Badenhorst v Northern Construction Enterprises (Pty) Ltd 1956 (2) SA 346 (T).

[3] Plascon-Evans Paints Ltd v Van Riebeeck Paints[3] (Pty) Ltd 1984 (3) SA 623 (A).

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