At a glance
- The courts continue to grapple with whether a "creditor" as referred to in Chapter 6 of the Companies Act, 2008 includes a contingent creditor and a ceded claim.
- Brand v Morgan Creek Boerdery (Pty) Ltd and Others 2026 (3) SA 171 (WCC) has brought much-needed clarity on certain aspects of the recognition of the contingent creditors’ rights in business proceedings.
- Ultimately, the court settled for the grammatical meaning of the word “creditor” because seeking to interpret it in a more purposive way tends to devolve into the formulation of policy considerations underlying business rescue.
In early 2025 and in what was hailed as a pro-business rescue judgment, the Supreme Court of Appeal in
Mashwayi Projects (Pty) Ltd and Others v Wescoal (Pty) Ltd and Others 2025 (3) SA 441 (SCA) delivered a significant ruling, to much fanfare, confirming that post-commencement finance providers have a voting interest in business rescue proceedings. Ultimately the court held that, absent the Companies Act 71 of 2008 (Companies Act) drawing a distinction between pre-commencement creditors and post-commencement creditors, they are both deserving of equal protection and as such post-commencement creditors are equally entitled to vote on the adoption of a business rescue plan. However, an application for leave to appeal this judgment was argued in the Constitutional Court in late 2025 and the outcome is imminent.
A further issue that has, however continued to trouble the business rescue community is whether a “creditor” as referred to in Chapter 6 of the Companies Act includes a contingent creditor and a ceded claim. Some of these questions were considered by the Western Cape Division of the High Court in Brand v Morgan Creek Boerdery (Pty) Ltd and Others 2026 (3) SA 171 (WCC). Morgan Creek Boerdery usefully exposes some of the challenges encountered by the courts when dealing with business rescue proceedings launched by contingent creditors. The judgment is crucial because it has satisfactorily addressed one of the persistent concerns, i.e. whether contingent and prospective creditors have locus standi to apply for debtors to be placed in business rescue.
Interpreting the meaning of “creditor”
The facts in Morgan Creek Boerdery were uneventful. An applicant creditor applied to place three companies conducting fruit farming operations near Piketberg in the Western Cape, in business rescue, with two of them owning the farmland and the third conducting the farming operations, namely Morgan Creek Boerdery (Pty) Ltd, Morgan Creek Oudemuur (Pty) Ltd (Oudemuur) and Morgan Creek Gelukwaarts (Pty) Ltd, respectively. In respect of Oudemuur, the applicant creditor argued that as he had agreed to stand surety for its debts to a commercial bank, his right of recourse against Oudemuur rendered him a creditor of it. He submitted that the word “creditor” should be interpreted expansively so as not to exclude contingent or prospective creditors and that it should be read as if it included the qualifier appearing in section 346(1)(b) of the Companies Act 61 of 1973, which permits winding-up proceedings to be brought by, among others, “creditors (including contingent or prospective creditors)”.
A contingent creditor can be defined as a lender or creditor whose debt is dependent upon an uncertain future event or development, or whose debt was subordinated to the debts of other creditors. The term “creditor” is not defined in the Companies Act, either generally in section 1, or specifically in section 128, as demonstrated in Mashwayi Projects. The absence of a specific definition of “creditor” might be indication that the legislature did not contemplate a specific meaning other than the ordinary grammatical meaning of the word; that is, a person or entity to whom an unpaid debt is due.
In Morgan Creek Boerdery the court was of the view that a contingent creditor is not a creditor as contemplated in Chapter 6 of the Companies Act. This is because, whatever policy reasons might motivate a broader interpretation, the ordinary grammatical meaning of the word “creditor” is a person or entity to whom an unpaid debt is due. As by definition nothing is due to a contingent creditor, it falls beyond the ordinary meaning of the word.
The court further relied on the fact that there is no concursus creditorum in business rescue and that creditors may come into existence after business rescue commences. A creditor with a contingent claim at the time that the business rescue commences might become an “unconditional” creditor before business rescue is completed, if the relevant condition is fulfilled. Until they do, their remedy might be limited to instituting winding-up proceedings, assuming they can establish the debtor’s inability to pay debts and the other requirements for such relief.
Much-needed clarity
Morgan Creek Boerdery has brought much-needed clarity on certain aspects of the recognition of the contingent creditors’ rights in business proceedings. That is, that a contingent or a prospective creditor has no standing to bring business rescue proceedings against a debtor. This will have an impact on lenders or creditors of subordinated debt or loans, sureties etc. Ultimately, the court settled for the grammatical meaning of the word “creditor” because seeking to interpret it in a more purposive way tends to devolve into the formulation of policy considerations underlying business rescue. This is due, in part, to uncertainties in interpreting other provisions governing the business rescue process.
Contrary to Juliet’s assertion, it appears names are not merely arbitrary labels after all. They do alter the intrinsic value or nature of a person, place or thing. Contingent and prospective creditors should therefore carefully consider their positions before launching business rescue proceedings.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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