Commisioner for SARS v Beginsel NO, a contrary view – by Don Mahon

I recently posted an article relating to voting rights afforded to creditors in Business Rescue. In that article, I concluded that normal unsecured, concurrent creditors would only be afforded voting rights to the extent of the value which they would receive if the company were being liquidated.

The Western Cape High Court has recently handed down a judgment in which Fourie J, expressed a different view.

In Commissioner for SARS v Beginsel N.O. SARS contended that all preferent creditors, as contemplated by section 92 to 106 of the Insolvency Act were to be categorised as unsecured creditors under section 145(4)(a) of the Companies Act, while all other concurrent creditors, as envisaged by section 103 of the Insolvency Act were concurrent creditors who would be subordinated in liquidation. This accords with the view expressed by me in my previous article.

However, Fourie J found that the reference to “concurrent creditors who would be subordinated in a liquidation” does not attach to all concurrent creditors, but only to those concurrent creditors who have subordinated their claims in a liquidation in terms of a subordination or back-ranking agreement and that on the plain wording of section 145 ( 4) (b) of the Act, the intention was to refer to a particular category of concurrent creditors, namely, those who have agreed that their claims can only be enforced if and when the value of the company’s assets exceeds its liabilities.

In conclusion, the learned Judge held that: “In the result, I conclude that, in terms of section 145 ( 4) of the Act, each concurrent creditor, save for the category of concurrent creditors who would be subordinated in a liquidation by virtue of a prior existing subordination agreement, has a voting interest equal to the value of the amount owed to that creditor by the company. Therefore, in my view, SARS would enjoy no greater voting interest than the other concurrent creditors of the company”.

It is unclear whether the judgment has been taken on appeal and it accordingly suggested that Business Rescue Practitioners adopt the approach of Fourie J.

A copy of the Judgment is attached.



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