This blog was co-authored by Adriaan Lourens, Candidate Attorney.

In July 2025, the Supreme Court of Appeal dismissed an appeal concerning a payment made to a creditor pursuant to a sale of business agreement after the liquidation of the seller. The judgment reinforces the centrality of the concursus creditorum in South African insolvency law, (which require that creditors with claims against the estate must be treated equally) and clarifies the legal consequences of post-liquidation payments. The concursus comes into effect upon liquidation and suspends the individual enforcement of creditors’ rights. No creditor may take steps to prefer itself over others or to alter the rights of the general body of creditors

The dispute arose from the liquidation of a franchisee that operated under a franchise agreement with a major grocery retail franchisor. A sale of business agreement was concluded between the franchisee and a third-party purchaser which required that the purchase price to be paid into the trust account of the franchisee’s attorneys, with payment instructions favouring certain creditors, including the franchisor. In June 2019, more than a year after the franchisee’s liquidation, the franchisor instructed the attorneys to pay it a substantial sum from the trust account. This was based on a mandate clause in the sale agreement which allowed the franchisor to issue payment instructions if the franchisee failed to do so.

The liquidators contested the payment, arguing it contravened the concursus principle. They asserted that the mandate terminated on liquidation and any disposition of the insolvent estate’s assets thereafter was void.

The franchisor argued that the agreement remained executory and that the liquidators had tacitly elected to abide by it, thus preserving the franchisor’s right to payment. The court rejected this argument and held that the concursus freezes the rights of all creditors and prohibits preferential treatment. Any post-liquidation disposition of assets is void, unless authorised by law or the court.

The franchisor was not a party to the sale agreement but relied on the mandate clause to secure payment. The court held that this authority did not survive liquidation and that its enforcement would undermine the collective rights of the general body of creditors. Mandates to agents, including attorneys holding trust funds, terminate upon liquidation.

This judgment affirms the strict application of the concursus principle and cautions creditors and agents against relying on pre-liquidation mandates or contractual rights to enforce payment. All funds held on behalf of an insolvent party may only be disbursed with the consent of the liquidator or a court order.

The decision underscores the need for careful structuring of commercial transactions and compliance with insolvency law, particularly by banks, attorneys and financial intermediaries handling trust funds or payments involving insolvent estates.

The full judgment can be accessed here:

Pick n Pay Retailers (Pty) Ltd v Ramalho, NO and Another (946/2023) [2025] ZASCA 97 (2 July 2025)