FirstRand Bank Ltd v KJ Foods CC (In Business Rescue)

KJ Foods CC, a long‑established bread producer employing about 220 employees, experienced financial distress and was placed under business rescue in July 2013. A revised business rescue plan was proposed which would result in all creditors, including secured and concurrent creditors, receiving 100 cents in the rand, whereas in liquidation concurrent creditors would receive only about 51 cents. At a creditors’ meeting on 2 December 2013, all creditors except FirstRand Bank Ltd (a secured creditor holding approximately 29.8% of the voting interest) voted in favour of the plan. Because the statutory 75% threshold was not met, the plan was rejected. The business rescue practitioners applied to court in terms of s 153(1)(a)(ii) and s 153(7) of the Companies Act 71 of 2008 to set aside FirstRand’s vote as ‘inappropriate’. The High Court set aside the vote and ordered that the plan be adopted. FirstRand appealed to the Supreme Court of Appeal.

The appeal succeeded only to a limited extent. Paragraph 1 of the High Court’s order was amended to reflect that FirstRand’s vote was set aside in terms of section 153(7). Paragraph 2 of the High Court’s order (which purported to order adoption of the plan by affected parties) was set aside. The appeal was otherwise dismissed.

This judgment is a leading authority on the interpretation of section 153 of the Companies Act. It clarifies that setting aside a dissenting vote against a business rescue plan involves a single, value‑based enquiry into whether it is reasonable and just to do so. It also authoritatively establishes that once a vote is set aside under section 153(7), the business rescue plan is deemed adopted ex lege, strengthening the effectiveness of business rescue proceedings and limiting obstructive creditor conduct.