LSO Consulting Engineers (Pty) Ltd and Another v Ndyamara and Others (56620/21) [2022] ZAGPPHC 49 (26 January 2022)

LSO Consulting Engineers (Pty) Ltd and Another v Ndyamara and Others (56620/21) [2022] ZAGPPHC 49 (26 January 2022)

The court held that the Companies Act does not provide for the amendment of a business rescue plan once it has been finally adopted by the required majority of creditors. Any provision in the plan purporting to give the business rescue practitioner the right to amend the plan after adoption is invalid and contrary to the statutory scheme, which vests control in the creditors through a democratic voting process. The purported amendment was not validly adopted, as it did not receive the statutorily required 75% majority vote. The application to set aside the amendments was therefore granted, and the original plan remains binding.

Citation
[2022] ZAGPPHC 49
Parties
Applicant: LSO Consulting Engineers (Pty) Ltd; Applicant: Phatwe Consulting Engineers CC; Respondent: Aviwe Ntandazo Ndyamara; Respondent: Umso Construction (Pty) Ltd; Respondent: The Companies and Intellectual Property Commissioner; Respondent: All other creditors of the business rescue as reflected in Annexure “B1”
Court
North Gauteng High Court, Pretoria
Jurisdiction
South Africa
Judgment Date
26 January 2022
Case Number
56620/21
Procedural Posture
Urgent Application / Full Reasons for Order Following Urgent Application
Outcome
Application granted; amendments to the business rescue plan declared unlawful and invalid.
Judges
Basson
Legal Topics
Business Rescue, Creditors Rights, Companies Act, Amendment of Business Rescue Plan, Majority Vote Requirement
Commercial and Corporate Civil Procedure Business Rescue Creditors Rights Companies Act Amendment of Business Rescue Plan Majority Vote Requirement

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Parties

LSO Consulting Engineers (Pty) Ltd

Applicant

Phatwe Consulting Engineers CC

Applicant

Aviwe Ntandazo Ndyamara

Respondent

Umso Construction (Pty) Ltd

Respondent

The Companies and Intellectual Property Commissioner

Respondent

All other creditors of the business rescue as reflected in Annexure “B1”

Respondent

Procedural Posture

Urgent Application / Full Reasons for Order Following Urgent Application

Legal Issues

  1. 1 Whether the purported amendments to the adopted business rescue plan are lawful and valid.
  2. 2 Whether the Companies Act permits amendment of a business rescue plan once finally adopted.
  3. 3 Whether a business rescue practitioner may reserve the right to amend a business rescue plan after adoption.

Ratio Decidendi

The court held that the Companies Act does not provide for the amendment of a business rescue plan once it has been finally adopted by the required majority of creditors. Any provision in the plan purporting to give the business rescue practitioner the right to amend the plan after adoption is invalid and contrary to the statutory scheme, which vests control in the creditors through a democratic voting process. The purported amendment was not validly adopted, as it did not receive the statutorily required 75% majority vote. The application to set aside the amendments was therefore granted, and the original plan remains binding.

Court Disposition

Application granted; amendments to the business rescue plan declared unlawful and invalid.

Orders

  • Leave is granted to the applicants in terms of section 133(1)(b) of the Companies Act 71 of 2008 to proceed with this application.
  • The purported amendments to the Business Rescue Plan published by the first respondent on 14 October 2021 and purportedly adopted at a creditors' meeting held on 18 October 2021 are declared unlawful and invalid, and are accordingly set aside.