Discharge of debts and claims

 Section 154 reads as follows:

(1) A BR plan may provide that, …, a creditor who has acceded to the discharge of the whole or part of a debt owing to that creditor will lose the right to enforce the relevant debt or part of it.

(2) If a BR plan has been approved and implemented…, a creditor is not entitled to enforce any debt owed by the company immediately before the beginning of the business rescue process, except to the extent provided for in the BR plan.

The apparent consequence that flows from these subsections is that both subsections have the end result that a creditor loses the right to enforce the debt, but a distinction is drawn between a creditor who has acceded to the discharge of the debtor and creditors in general.

For sec154(1) to apply, the BR plan must include a statement of the extent to which the company is to be released from payment of its debts and the creditor must accede to such discharge. A creditor is said to have acceded to the discharge if such creditor voted in favour of a BR plan providing for a discharge. The effect of this subsection is that the debt ceases to exist.

Sec154(2) provides that creditors are not entitled to enforce any debt against the company to any extent beyond that provided by the BR plan after its approval and implementation; thus, creating a defence in personam for the company. In other words, this subsection provides a defence that is personal to the company, without discharging the debt itself.

The above subsections have far-reaching legal consequences, not only in respect of the company in business rescue, but any other person may be affected by the company’s affairs, including sureties. Therefore, proper legal advice should be sought before voting for the adoption of a BR plan.

Disclaimer: The contents and information provided above are generalised and must not be acted upon as legal advice

Contact information

 Visit BVR at 7 Alcrest Building, on the corner of Mc Adam and Rothery Streets, Mbombela.