The applicant was the registered bondholder of a notarial bond over movable property owned by the first respondent (Corlink), including farming equipment, livestock, and purportedly water rights. Following Corlink's financial distress, three farms and movables were sold to the seventh respondent (Gert Trust) on 28 August 2014. On 30 October 2014, Corlink's sole director placed the company in business rescue proceedings. Business rescue practitioners prepared and published a business rescue plan that did not reflect the applicant as a creditor. The plan was adopted at a creditors' meeting on 22 April 2015, with the applicant voting against it. The plan allocated R46,265,000 to Absa and R24,236,100 to GWK as secured creditors, with concurrent creditors receiving 1.58 cents in the rand from R560,000. The applicant sought to set aside the business rescue plan and have it amended to reflect the applicant as a secured creditor for an amount not exceeding R7,217,500. An agreement was reached whereby GWK undertook to hold R7,217,500 in trust pending final adjudication. The applicant modified its relief to only partially set aside the plan to reflect it as a secured creditor, affecting only GWK's entitlement.
The application for leave to appeal was dismissed with costs.
The binding legal principles established are: (1) Creditors who have voted for a business rescue plan have a direct and substantial interest in applications seeking to set aside or amend that plan, and their non-joinder is fatal to such applications. This is because any amendment to the plan affects their rights and entitlements under the plan they voted for, potentially prejudicing their position. (2) A court has no power to partially set aside and amend an adopted business rescue plan so as to alter its operation in relation to one or more creditors without the approval of creditors through the statutory voting process. The only plan which practitioners can implement is one adopted by creditors in accordance with section 152 of the Companies Act 71 of 2008. Courts cannot foist on creditors a plan which they have not discussed and voted on at a creditors' meeting.
The court noted that water rights under section 21(a) of the National Water Act 36 of 1998 are incorporeal property and thus not capable of being pledged by way of notarial bond. The court also indicated that it was unnecessary to investigate on what grounds a court may set aside an adopted business rescue plan and whether such relief ceases to be competent once the plan has been implemented, as the applicant did not persist with the original relief claimed. The court further observed that since the question of joinder had been raised at a previous hearing and the applicant had taken a deliberate decision not to join other creditors, the court a quo was not required to afford the applicant a further opportunity to join the other creditors.
This case is significant for establishing important principles regarding business rescue proceedings under the Companies Act 71 of 2008. It clarifies that creditors who have voted for a business rescue plan have a direct and substantial interest in any application seeking to set aside or amend that plan, and must be joined as parties to such proceedings. The case also establishes that courts cannot partially amend adopted business rescue plans without the approval of creditors through the statutory voting process prescribed in section 152 of the Companies Act. The judgment reinforces the sanctity of the creditors' voting process in business rescue proceedings and limits judicial interference with plans that have been properly adopted by the prescribed majority of creditors. It emphasizes that the business rescue regime is creditor-driven and that courts cannot impose outcomes that creditors have not voted for.
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