Ranking Order of Creditors
Ranking order of Creditors in Business Rescue:
In Merchant West Working Capital Solutions (Pty) Ltd v Advanced Technologies and Engineering Company Ltd, South Gauteng High Court Case number 13/12406 the ranking of claims was set out as follows by the learned Judge Kgomo:
1) The practitioner, for remuneration and expenses and other persons (including legal and other professionals) for costs of business rescue proceedings;
2) Employees for any remuneration which became due and payable after business rescue proceedings began;
3) Secured lenders or other creditors for any loan or supply made after business rescue proceedings (post commencement finance);
4) Unsecured lenders or other creditors for any loan or supply made after business rescue proceedings began (post commencement finance);
5) Secured lenders or other creditors for any loan or supply made before business rescue proceedings began;
6) Employees for any remuneration which became due and payable before business rescue proceedings began; and
7) Unsecured lenders or creditors for any loan or supply made before business rescue proceedings began.
The above makes it clear that the claims of secured lenders prior to the commencement of business rescue rank after the claims of both secured and unsecured post-commencement claims. Post-commencement financiers can thus seek comfort in that the court has, at least for now, settled the much-debated position of the ranking of creditors who hold security for their claims prior to the commencement of business rescue.
