The case of Tamela Mezzanine Debt Fund I Partnership v KT Wash Detergents Proprietary Limited (delivered on 12 December 2025) provides crucial insight into how courts approach disputes when creditors reject a proposed business rescue plan. KT Wash, a manufacturer of household detergents, voluntarily entered business rescue proceedings in March 2025 after encountering severe financial distress. Tamela, a significant creditor, had previously supported the company and contributed a further R70 million in post-commencement finance to sustain operations and pay 107 employees while rescue practitioners formulated a plan.

In September 2025, the business rescue plan was put to KT Wash’s creditors for a vote. Tamela backed the proposal, but the plan only received support from creditors representing 50.73% of voting interests – insufficient to be adopted under the Companies Act 71 of 2008 (Companies Act). The plan was therefore rejected, prompting Tamela to approach the court to set aside the creditors’ rejection of the business rescue plan as “inappropriate”.

Section 153 of the Companies Act empowers the court to set aside a creditor’s vote if the rejection is deemed “inappropriate”. This provision requires a court to balance the competing rights of interested stakeholders. Tamela argued that the creditors’ rejection of the business rescue plan was irrational, contending that in the absence of the vote being set aside, KT Wash would, inevitably, be placed in liquidation. This, it contended, would result in KT Wash’s creditors not recovering anything owed to them. Tamela argued further that the adoption of the business rescue plan would save the employees’ jobs and be to the benefit of the local community. However, opposing creditors – including major suppliers and former management – maintained that the plan, while at face value satisfying the requirements of the Companies Act, lacked sufficient detail to enable a proper, commercial decision, to be taken by them. The opposing creditors took issue with the valuation of KT Wash’s assets in the business rescue plan. This valuation was the apparent basis upon which the sale of KT Wash’s business to an entity related to Tamela was calculated. It was also used as the basis for the computation of any expected return to creditors if KT Wash were to be placed in liquidation.

Pullinger AJ, having engaged in an extensive analysis of earlier decisions, concluded that, in setting aside a vote as being “inappropriate”, the court does not merely “rubber stamp” the proposed plan, but performs a “single enquiry and value judgment” that balances the reasons for rejection against the likely benefits of liquidation and the overall statutory purpose of business rescue. The judge concluded that, ultimately, a business rescue plan must be fair to all stakeholders, including, employees. He considered fairness to stakeholders to be a factual enquiry to be determined on a case-by-case basis. So, he reasoned, the extent of the factual underpinnings and underlying assumptions and calculations that give rise to the ultimate proposal on how the business rescue plan is intended to operate in stakeholders’ interests should appear from the proposed plan the creditors were asked to adopt.

The court ultimately dismissed Tamela’s application, identifying critical shortcomings in the proposed plan, including a lack of transparency that presented at face value, an advantage to Tamela that was disproportionate to other creditors. A legitimate business rescue plan, the court emphasised, must balance the interests of all stakeholders, not just the largest or most influential creditor.

The court further underscored the need for transparency: for creditors to make an informed choice, the plan must disclose all “necessary facts”. In this instance, although the plan involved selling the business as a going concern, it omitted essential data – such as justification for the purchase price and a clear method for calculating the final dividend owed to creditors. These omissions prevented creditors from accurately assessing whether the plan offered them a fair deal.

Importantly, the court highlighted that a proper valuation of KT Wash’s business was required, not merely an asset valuation. The plan’s focus on macro-level benefits – such as preserving 107 jobs and supporting the local economy – while commendable, did not satisfy the requirement to demonstrate fairness to all creditors. Without clear facts on valuation and dividend calculation, the court could not conclude that the plan fairly balanced the rights and interests of all stakeholders.

Accordingly, the court held that, in the absence of sufficient information for creditors to judge the fairness of the deal, their vote to reject the plan could not be found to be “inappropriate”. This finding reinforces that creditors are entitled to decline a plan that is either insufficiently transparent or unfairly skewed toward particular parties.

One of the most significant aspects of Pullinger AJ’s judgment is the clarification regarding the aftermath of a rejected plan. Tamela and the business rescue practitioners (BRPs) argued that if their application failed (meaning the votes rejecting the plan were not set aside), the business rescue process would be terminated and KT Wash would have to be liquidated. The court disagreed, clarifying that the failure of a section 153 application does not automatically end business rescue proceedings.

Instead, under section 151, the meeting at which the plan was rejected is merely “adjourned”, not closed. After a court declines to set aside the rejection, the meeting resumes, and affected persons – creditors, in particular – may table a motion requiring the BRP to prepare and publish a revised plan. The process thus returns to the creditors, who retain the power to instruct the BRP to draft a better plan. Only if creditors choose not to pursue a revised plan must the BRP file a notice to terminate the business rescue process. The judge pointed out that, while Tamela had exhausted its remedies in terms of the vote, its exercise of its rights did not deprive KT Wash’s other creditors of their rights as a matter of course.

This judgment is a vital reminder of several key principles in business rescue proceedings:

• Transparency is mandatory: A business rescue plan must be supported by robust facts and clear calculations; it cannot rely on vague assurances or ‘trust us’ sentiments.
• Fairness is crucial: Courts will closely scrutinise rescue plans that appear to benefit one major creditor or insider at the expense of the broader creditor group.
• Creditors hold the power: The fate of the company ultimately rests with the creditors, who can demand a revised plan or opt for liquidation if a plan fails to meet their standards.

In summary, the High Court’s ruling in the KT Wash case sets a clear precedent: a business rescue plan must transparently and fairly balance the interests of all stakeholders, as envisaged in section 7(k) of the Companies Act.