Registering a general notarial bond gives a creditor rights over a debtor’s movable property. Registration alone does not give the creditor possession of that property or create a real security right over it. To obtain that security, the creditor must perfect the bond.
Registration and perfection
A general notarial bond is registered over movable property without the property being delivered to the creditor. Perfection is the process through which the creditor takes possession of the property, usually under a court order. Possession gives the creditor a pledge and, with it, a real security right in the property.
Before perfection, the bondholder has contractual rights against the debtor but no pledge over the property.
The Spar application
In The Spar Group Limited v Durbanville Investments (Pty) Ltd (Case 2026-092513, 3 May 2026, Gauteng Division, Johannesburg), Spar held a general notarial covering bond over Durbanville’s movable property. The bond secured debt exceeding R3.1 million.
Durbanville’s sole director disclosed that the company was insolvent. He also disclosed that Nedbank held a second general notarial bond over the same property. Spar applied urgently for an order permitting it to perfect its bond by taking possession of the property.
Durbanville did not dispute the bond, the debt or Spar’s contractual right to perfect. It argued that taking possession would prevent the business from continuing to trade. It also maintained that Spar was protected because its bond had been registered before Nedbank’s bond.
Priority is not possession
Durbanville relied on the doctrine of notice. This doctrine may prevent a later bondholder who knew about an earlier bond from gaining priority by perfecting first. The Court held that this did not remove the risk faced by Spar.
Referring to Contract Forwarding (Pty) Ltd v Chesterfin (Pty) Ltd [2002] ZASCA 143, the Court confirmed that a general notarial bond does not create a real security right merely because it was registered. That right arises when the bond is perfected and the creditor takes possession. The doctrine of notice may regulate the competing claims of two bondholders. It does not prevent another creditor from applying to liquidate the debtor.
What happens upon liquidation?
A concursus creditorum arises when a winding-up order is granted. In practical terms, the rights of creditors become fixed and the company’s property must be administered collectively under insolvency law.
An unperfected bondholder cannot thereafter take possession to improve its position. It is limited to whatever preference insolvency legislation affords to the bond. Earlier registration may determine priority between competing bondholders. It does not preserve a right to perfect after the concursus creditorum has arisen.
The risk of waiting
Delay exposes an unperfected bondholder to two risks. Another bondholder may perfect first where the doctrine of notice does not apply. Alternatively, a creditor may obtain a winding-up order before perfection takes place. Either event may prevent the bondholder from acquiring a pledge over the property. The Court found that Durbanville’s insolvency and Nedbank’s competing bond justified Spar seeking urgent relief.
Durbanville also argued that perfection would prevent the business from continuing as a going concern. The Court rejected this argument. Relying on Beadica 231 CC v Trustees for the time being of the Oregon Trust [2020] ZACC 26, it held that commercial prejudice did not justify refusing enforcement once the contractual requirements for perfection had been met, unless enforcement offended a recognised rule of public policy.
Registration and perfection therefore perform different functions. Registration records the bondholder’s contractual rights and may affect priority. Perfection, through possession, creates the real security right. A lender holding an unperfected bond over the property of a distressed debtor should assess the risk of delay before liquidation intervenes.
