Court Bars Post-Commencement Creditors From Voting
Constitutional Court rules Arnot Coal's business rescue plan must go back to the practitioner for a fresh creditor vote.
Updated on Nov. 4, 2026 in Business Strategy
The Constitutional Court ruled unanimously on 7 October 2026 that creditors with post-commencement claims cannot vote on adoption of a business rescue plan, sending the Arnot Coal plan back to the practitioner. The ruling sets aside the Supreme Court of Appeal's order in the Middelburg, Mpumalanga mine's rescue process.
Why it matters
The judgment clarifies how voting rights in South African business rescue are separated from preferential treatment under section 135 of the Companies Act. It determines which creditors count when a rescue plan is put to a vote.
The initial vote gave 75.4% support for the sale option, which a forensic review revised down to 70.5%, below the 75% threshold required under section 152 of the Companies Act. Wescoal Mining, a subsidiary of Salungano Group, held an indirect 50% interest in Arnot Coal.
The players
Phahlani Lincoln Mkhombo
Business rescue practitioner overseeing the Arnot Coal process, responsible for preparing and publishing the revised rescue plan.
Constitutional Court of South Africa
South Africa's highest court in constitutional matters, which delivered the unanimous ruling on creditor voting rights.
Salungano Group
South African coal mining group whose subsidiary Wescoal Mining held an indirect 50% interest in Arnot Coal.
The details
Arnot Coal entered business rescue on 10 October 2022, and Ndalamo Coal proposed acquiring its business. Irregularities including duplicated votes, withdrawn votes and proxy problems were identified in the initial vote, and on 13 October 2026 practitioner Phahlani Lincoln Mkhombo sought approval to prepare a new or revised rescue plan, which received 99.31% support.
Timeline
10 October 2022: Arnot Coal entered business rescue.
28 July 2023: Creditors' meeting considered the mine's future proposals.
7 October 2026: Constitutional Court delivered its unanimous ruling.
13 October 2026: Practitioner sought approval for a new rescue plan.
30 November 2026: Deadline for the practitioner to publish the revised plan.
Business Strategy in Context
The ruling turns on the 75% approval threshold in section 152 of South Africa's Companies Act, which governs whether a business rescue plan is adopted. By excluding post-commencement creditors from the vote, the court shapes how that threshold is calculated in future rescues.
Creditors whose claims arose after business rescue began will no longer be counted in votes on a rescue plan. Affected creditors should watch for the revised plan and the notice of the creditors' meeting to consider it.
The takeaway
Voting eligibility in business rescue depends on the type of claim a creditor holds, not only on the size of the debt. Stakeholders in similar restructurings should check whether their claims predate the commencement of rescue before counting on a vote.
What happens next
The practitioner must publish the revised or new rescue plan by 30 November 2026, after which creditors will be notified of a meeting to consider it.
Further reading
For broader context on restructuring approaches, see Business Strategy coverage.
Source note: This article includes information reported by Vutivi.
