The provisional liquidators of African Global Operations, formerly Bosasa, have won a legal victory with the Supreme Court of Appeals (SCA) effectively ruling that the liquidation of six companies that received illegal contracts from the state can proceed.
The court also ruled that an auction of the assets of the six companies, which raised around R113 million, was lawful.
The judgments pave the way for the liquidation proceedings to continue. This includes an investigation into who benefited from the millions made by Bosasa’s corrupt dealings with the state and who should be held accountable, leading to deals with the Department of Corrections, Airports Company SA and the Department of Social Affairs, among others Development.
They could include ANC heavyweights Gwede Mantashe, Zweli Mkhize and President Cyril Ramaphosa’s son Andile Ramaphosa, according to evidence before the Zondo State Capture Inquiry Commission.
Others in the spotlight will be former COO Angelo Agrizzi and relatives of the late Bosasa CEO Gavin Watson, who fought a “contentious battle” with the preliminary bankruptcy trustees’ ruling, which four judges agreed, saying the revelations made at the state arrest investigation into Bosasa, now known as Global Holdings, resulted in its banking facilities going into decline
After Bosasa could not find another bank, the directors of Global Holdings and Global Operations (a subsidiary) decided to place Operations and its 10 subsidiaries in voluntary liquidation under the Companies Act.
What followed was a spate of litigation, the main reason being that in December 2019 the liquidators wanted to sell assets of six of the companies, the “backbone of the group”, at a public auction.
Meyer said the provisional liquidators became aware, and the directors of the companies, of the need to dispose of the assets expeditiously after the liquidators were told the cabinet had decided that all service level agreements between departmental companies and state-owned ones Companies and all companies affiliated with the African Global (Bosasa) Group must be terminated.
The six Bosasa companies had been awarded lucrative income-generating contracts. Most had already been fired. The main assets were acquired to provide services under the terminated contracts.
The monthly insurance charges alone amounted to R150,000. Without the power to sell the assets, the companies would have to continue paying for these substantial assets.
Prior to their final appointment and before a creditors’ meeting, the trustees petitioned the court to extend their powers to include the sale of assets to allow.
The directors consented, but on condition that they be consulted and consent to such a sale.
They argued in their court filings that they had no consent received for sale.
Then the day before, in an apparent attempt to stop the sale, they initiated proceedings to put the companies on the corporate bailout, which would allow them to get out of trouble , and which, if approved, would annul the liquidation proceedings and thus the auction.
The auction continued anyway.
Much of the argument in the SCA revolved around the interpretation of when a corporate reorganization application is “filed”.
Meyer said, while there were conflicting versions, “I subscribe to the i interpretation , that [an application] must be made, served on the company and on any affected person in order to trigger the suspension of liquidation proceedings already initiated.”
“Any affected person, a shareholder or a creditor of a company, a registered The trade union and individual employees are entitled to oppose or support the company rescue request.
“If the documents are examined properly, it cannot be said that compliance has still taken place or even that the service and notification requirements.
“It is common for the Bosasa Group to have had around 4,500 employees. This was reduced to 50 employees after the voluntary dissolution.”
On December 3, 2019, only 29 employees were informed electronically about the company rescue request, said Meyer.
He said the A petition to stop the auction should also have been served on each of the joint liquidators of each of the six companies.
“I conclude that the petition for corporate restructuring was not “filed” in accordance with the law and the Suspension of the liquidation proceedings, including the public auction and subsequent sales, have not been initiated.”
Regarding the allegation that the preliminary liquidators did not have the authority or consent to conduct the auction, he said the powers of the Liquidators had been extended by the court.
“It could never have been the intention of the court hearing this motion to appoint the liquidators elect never to sell the assets without the consultation or approval of the directors. Such a conclusion would be absurd. It would ignore the enhanced powers granted to the liquidators.”
The rulings will also pave the way for the continuation of a behind-closed-doors Section 417 investigation led by retired Judge Meyer Joffe to deal with it to deal with Bosasa’s finances and investigate allegations of misconduct by its directors.
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