Vantage Goldfields SA (Pty) Ltd and Others v Arqomanzi (Pty) Ltd

Three mining companies (Vantage Goldfields (Pty) Ltd, Barbrook Mines (Pty) Ltd, and Makonjwaan Imperial Mining Company (Pty) Ltd) were placed in business rescue between 2016 and 2016 after MIMCO's mining operations ceased following a fatal mine collapse on 5 February 2016. Business rescue plans were adopted by creditors in 2016-2018 depending on funding from the Industrial Development Corporation (IDC) through a third party, Flaming Silver. When Flaming Silver failed to secure equity funding in 2018, the expected IDC funding did not materialize. The practitioners invited new offers for funding and received proposals from Arqomanzi and Real Win Investments (RWI). On 15 February 2021, the practitioners purported to unilaterally amend the adopted business rescue plans by relying on a clause in the plans that permitted amendments if not prejudicial to affected persons and if practitioners acted reasonably. The amendments included changes to payment dates and, critically, changes to the identity of funding entities. Arqomanzi launched urgent proceedings to stop implementation of the amended plans. The high court granted a rule nisi interdicting the practitioners from implementing the amended plans, which was later confirmed as a final order.

• Whether business rescue practitioners can unilaterally amend adopted business rescue plans by relying on a clause in the adopted plans
• Whether a clause in an adopted business rescue plan authorizing unilateral amendments by practitioners is consistent with the scheme of the Companies Act 71 of 2008
• Whether the high court was correct in confirming a rule nisi interdicting the implementation of unilaterally amended plans
• Whether declaratory orders can be granted when not sought by any party
• Whether an affected party who joins proceedings and actively opposes an application is liable for costs

The appeal was upheld in part. Paragraphs 49.1, 49.2, 49.4 and 49.5 of the high court's order (the declaratory orders and procedural directions) were set aside. The appeal was dismissed in respect of paragraphs 49.3 and 49.6 (the confirmation of the rule nisi interdicting implementation of the amended plans and the costs order). The appellants were ordered to pay the costs of the appeal, including the costs of two counsel, jointly and severally, the one paying the others to be absolved.

A clause in an adopted business rescue plan that purports to authorize business rescue practitioners to unilaterally amend the plan is contrary to the scheme of the Companies Act 71 of 2008. The Companies Act does not provide for the unilateral amendment of adopted business rescue plans by practitioners. Business rescue plans are the product of engagement between practitioners and creditors, and control over rescue proceedings must be exercised by democratic majority vote of creditors and affected parties in accordance with section 145(1) of the Companies Act. At most, a clause permitting amendments could only authorize administrative changes that do not affect the substance of the plan. Substantial amendments, particularly those concerning the identity of funders and the funding model, go to the heart of the rescue and cannot be made unilaterally by practitioners. The only plan which practitioners can implement is one adopted by creditors in accordance with section 152 of the Companies Act.

The court made several obiter observations. First, it noted that courts should not grant declaratory orders that were not sought by any party, as this oversteps judicial powers. Courts should adopt restraint even when attempting to find robust solutions to delays. Second, the court emphasized that business rescue proceedings must be conducted with "maximum possible expedition" given their nature and purpose. The court expressed concern about the six-year delay in these proceedings and the hardship caused to former employees and the families of deceased miners. Third, the court clarified that section 145(1)(b) of the Companies Act, which entitles creditors to participate in court proceedings during business rescue, does not "encourage" affected persons to litigate but merely affords them the right to do so - they participate at their own peril as to costs. Fourth, the court noted that it is the practitioners' prerogative alone to decide whether proposed plans are "satisfactory" before presenting them to creditors, provided they remain independent, objective, impartial, and act in the best interests of the company. The court also noted that whether the Roelofse order was a brutum fulmen or should be complied with was not for determination in this appeal, as that order itself was not on appeal.

This case is significant in South African company law and business rescue jurisprudence because it clarifies the limits on the powers of business rescue practitioners to amend adopted business rescue plans. The judgment emphasizes the democratic nature of business rescue proceedings and the central role of creditor participation and voting. It establishes that practitioners cannot circumvent the statutory scheme by including self-serving clauses in plans that authorize unilateral amendments. The case reinforces that the Companies Act provides a comprehensive framework for business rescue that must be followed, and that plans cannot be fundamentally altered without creditor approval through the prescribed voting mechanisms. The judgment also addresses procedural issues regarding the granting of declaratory orders not sought by parties and the liability for costs of affected parties who actively participate in litigation. The court's observations about the need for expedition in business rescue proceedings, particularly given that these companies had been in business rescue for nearly six years, highlight the tension between proper procedure and the need for timely resolution.