On 7 October 2026, the Constitutional Court delivered a judgment settling a question that has unsettled the restructuring market: can creditors whose claims arose after business rescue began vote on the business rescue plan? The Court held, unanimously, that they cannot.

Background: a dispute over who gets to vote

The case concerned disputed voting on the business rescue plan of Arnot Opco (Pty) Ltd. The High Court held that only creditors whose claims existed when business rescue commenced could vote. The Supreme Court of Appeal (SCA) disagreed, finding that ‘creditor’ bears its ordinary meaning and that the Companies Act, 2008 (Companies Act) does not distinguish between pre- and post-commencement creditors, with the result that post-commencement creditors could vote; it was influenced in part by the concern that excluding them would discourage post-commencement finance. The Constitutional Court has overturned the judgment of the SCA on this issue.

The key legal principles emanating from the Constitutional Court judgment

‘Creditor’ carries its established insolvency-law meaning. The Companies Act does not define ‘creditor’. The Court held that this omission was deliberate: Parliament must be taken to have known how the word is used in insolvency and liquidation law and chose to adopt that meaning. On that meaning, a creditor is someone who is owed a debt when business rescue begins. The Court, however, was clear that the insolvency concept of a concursus creditorum (the ‘freezing’ of the creditor body at a fixed point) does not apply to business rescue proceedings.

The creditor list at commencement decides who votes. A business rescue plan must contain a ‘complete list’ of the company’s creditors as at the start of business rescue, ranked as secured, preferent or concurrent according to insolvency law. The Court treated this as more than a disclosure item. It establishes which creditors are entitled to participate and vote. The Companies Act does not require the plan to deal with post-commencement creditors at all, and the Court regarded that omission to intentionally exclude post-commencement creditors from participation in voting.

Voting interests are determined according to insolvency law. A creditor’s voting interest is determined by the amount ‘owed to that creditor by the company’. The Court read that wording as excluding post-commencement creditors. Voting under section 152 also assumes a pool of voting interests that can be identified and valued in advance. The Court was of the view that there is no way to fit post-commencement claims into that pool.

Claims must be proved, not just recorded in the company’s books. The judgment points towards a more formal proof of claims process in business rescue, similar to liquidation. Appearing in the company’s financial records will not on its own be enough.

Rescue finance is a priority play, not a governance play. The Court called the bargain ‘security rather than governance power as the trade-off’, referring to the ranking preference given to post-commencement creditors. The Court adopted the view that a post-commencement creditor’s preferent claim cannot be compromised in a business rescue plan. In the Court’s words, ‘It would be incoherent to grant a post-commencement financier a preferent claim under section 135 of the Act if that claim could then be suspended or extinguished by the business rescue plan.’ The Court considered this ‘super-preference’ enough of an incentive to lend to a distressed company. However, in reality the preference afforded to post-commencement creditors ranks behind the practitioner’s remuneration and expenses, and other costs of the business rescue; and employees’ post-commencement claims.

The rule protects pre-commencement creditors. The Court reasoned that financiers who already hold a statutory preference would distort pre-commencement creditors’ collective decision if they could also vote and warned against speculators using their ‘financial muscle’ to block suitable plans and push companies into liquidation.

The same rule applies to employees. Employees vote as creditors only for remuneration, or other employment related claims, that arose before business rescue began. Employment related claims that arise during the business rescue proceedings carry the section 135 preference, but no vote.

What this means for lending practice and security structures

The Court’s interpretation creates certainty and a level of predictability in respect of the creditor voting pool but will leave an already conservative and niche distressed debt funding market feeling exposed.

However, all is not lost with the vote – in addition to the section 135 preference, lenders can look to secure their position through the contractual arrangements.

Lenders providing new money in a business rescue should price and structure it on the basis that their protection lies in security, ranking and enforceability, not in shaping the plan through the vote. The plan cannot compromise a post-commencement finance claim, which makes post-commencement finance safer. That includes protection if the rescue fails and the company is liquidated.

Influence over the plan has to come from contract and from your pre-commencement position. Rescue financiers cannot vote on post-commencement claims, so lenders who want a say in the plan should think about:

• conditions precedent, information rights, milestones and drawdown controls in the rescue facility, negotiated with the business rescue practitioner; and
• where they already have pre-commencement exposure, protecting and properly proving that pre-commencement claim, since that is what carries the vote.

For lenders with both pre- and post-commencement exposure to the same debtor, clean documents and accounting that keep the two apart will matter. The pre-commencement claim is susceptible to compromise but attracts voting rights. The post-commencement advance cannot be compromised and is afforded preference in terms of section 135.

The Court focused on formal proof and on the creditor list fixed at commencement. Lenders should therefore lodge and prove their claim promptly, and check that they appear correctly ranked (secured, preferent or concurrent) on the creditor list in the plan. Lenders should not assume that an entry in the company’s books will secure their voting position.

There is less room for tactical vote-buying through new money. The judgment closes off advancing post-commencement credit to build a voting position, whether to back or block a plan.

Suppliers and landlords who keep trading.

The Court confirmed that amounts owed to suppliers and landlords for keeping the business going during the rescue are post-commencement claims. Many trade creditors will hold both a pre-commencement balance, which votes, and new supplies, which enjoy a preference but no vote. Few track the two separately. Suppliers and landlords should now do so from the first day of the rescue.

Can a rescue lender still challenge a vote?

In reaching its conclusion, the Court said that the practical effect of the definition of ‘affected person’ in section 128 is to exclude post-commencement creditors. Several rights under chapter 6 attach to affected persons, including the right to apply to court to set aside the result of a vote as inappropriate under section 153. Read strictly, the judgment may limit the remedies of a rescue lender whose preferred plan is rejected. We expect this point to be tested.

A question left unanswered: what of the vote in respect of pre-commencement claims acquired after business rescue begins?

The judgment does not squarely decide whether someone who acquires a pre-commencement claim after business rescue has begun can vote on it. This matters to distressed debt investors and to banks selling non-performing exposures. Until the courts rule on it, buyers should treat voting rights on traded claims as uncertain and heed the Court’s warning about speculators using financial muscle to influence the outcome of the vote on a business rescue plan.

This risk is not merely theoretical. The Court described Mashwayi as a creditor and the cessionary of claims from several former creditors of the company, yet it was treated throughout as a post-commencement creditor, and the Court framed the issue as whether creditors that acquire claims after commencement may vote, although its reasoning addresses claims that arise after commencement. There is a respectable argument that a cessionary simply steps into the shoes of the cedent, so that a claim which existed at commencement should keep its vote whoever holds it. However, given the facts of this case and the Court’s concern about speculators, buyers should price on the basis that a claim acquired after commencement may carry no vote, and sellers should expect to be asked for protection on this point.

Not quite the final word: some practical thoughts

The judgment has drawn mixed reactions from the restructuring market. Some welcome it as bringing South Africa in line with leading restructuring jurisdictions and expect business rescue to carry on much as before. Others worry that funders who have no say over the plan will be slower to support a business while it keeps trading. In our view the practical effect lies somewhere in between, and several questions remain open.

Plans adopted since January 2025

Between the Supreme Court of Appeal’s judgment of 29 January 2025 and this judgment, plans were adopted on voting schedules that counted post-commencement creditors. Where those votes made the difference, the adoption of the plan may now be open to challenge. Practitioners with meetings coming up should recalculate their voting schedules, and creditors relying on recently adopted plans should check whether the outcome depended on post-commencement votes.

Looking ahead

The market is already discussing alternatives, including pre-pack style transactions, the purchase of claims, credit bidding and consensual priming arrangements. Each has its limits under the Companies Act. Buying claims runs into the cessionary risk discussed above. Priming new money ahead of existing security requires the agreement of the secured creditors, because section 135(2)(a) only allows rescue finance to be secured over unencumbered assets. Pre-packs may prove the most robust option, because funders who take part before the rescue begins hold claims that predate it and so keep their vote.

The Court drew on foreign law in support of its view, but noted that the exclusion of post-commencement creditors is not universal. If the policy aim is to attract more rescue capital, the answer may ultimately lie with the Legislature, for example through formal consultation rights for rescue funders or clearer rules on priming and claims trading.

Business rescue will survive this judgment, but it will not be business as usual. Influence has moved from the creditors’ meeting to the facility agreement and to the negotiations that take place before a company enters business rescue. Clients who adapt their documents and strategy now will be best placed when the next rescue begins.

Written by Tobie Jordaan, Partner and Bianca Masterton, Knowledge & Learning Lawyer, Bowmans