Sureties may not be affected by business rescue plan

Without deciding the point, the Supreme Court of Appeal in New Port Finance Company (Pty) Ltd v Nedbank Limited held that the decision in Tuning Fork (Pty) Limited v Greeff may not be correct in saying that where the principal debts are diminished or expunged by a business rescue plan the sureties are released accordingly.

Section 154 of the Companies Act is capable of the construction that it deals only with the ability to sue the principal debtor and not the existence of the debt itself. If that is the case then the liability of the surety would be unaffected by the business rescue plan unless the plan itself makes specific provision for the situation of sureties.

A final decision of the Supreme Court of Appeal on the point is needed unless the Companies Act is suitably amended soon. The business rescue provisions are under consideration at the moment.