South Africa: Bosasa Liquidation 'An Error in Judgement', Court Finds

The Gauteng High Court in Johannesburg has ruled in favour of corruption-accused company Bosasa, ordering provisional liquidators to return control of the company to its directors within 12 hours.

Acting Judge Goolam Ameer handed down a 24-page judgment on Thursday, dismissing arguments put forward by lawyers for liquidator Cloete Murray. The arguments were heard on Wednesday.

Bosasa chairperson Joe Gumede filed the urgent application on March 4.

In his judgment, Ameer agreed with Bosasa, who was represented by advocate Mike Hellens, SC, and declared that special resolutions taken by the board of directors on February 12, to place the companies under voluntary liquidation, were null and void.

Ameer found that this was because the resolutions and the meeting at which they were signed did not conform to regulations as set out in the Companies Act.

Bosasa, now named African Global Operations, and 10 of its subsidiary companies were placed under voluntary liquidation as a result, the company said at the time, of a decision taken by its bank to shut down its accounts.

Ameer found that Murray, represented by advocate Werner Luderitz, SC, failed to deal with this "core factual issue" in their papers and during argument.

"From my observation of the manner in which the comprehensive answering affidavit and heads of argument were prepared, I find it difficult to accept the submission that the respondents, represented by competent counsel who delivered the able argument I heard, were unable to deal with essentially one core factual basis on which this application is premised... that the resolutions adopted are a sham," his judgment reads.

Gumede/Bosasa argued that the company was suffering irreparable harm due to a R15m missed SARS payment. Ameer agreed, and added that decisions taken by the liquidator on an hourly basis could add to this harm.

He further argued that the directors had acted "somewhat misguidedly" on the advice of an attorney in signing the resolutions.

Ameer agreed, calling the move "an error in judgement".

He found that the liquidators, who argued that they did not have sufficient time to file appropriate responding papers, did in fact file comprehensive papers - in which they failed to tackle the main point raised by Bosasa/Gumede.

While he questioned Hellens critically during argument on the fact that all the directors, including Gavin Watson and Gumede, had signed the resolutions and pointed out they were experienced directors of a substantial firm, no matter what their intention was, the resolutions remained irregular.

"To my mind, whatever the intention of the members... the mandatory statutory provisions of the Companies Act must prevail."

Ameer further awarded costs to Bosasa, and ordered Murray and two of his co-liquidators, Tania Oosthuizen and Ralph Lutchman, to pay costs in their personal capacities.

In addition to declaring the resolutions null and void, Ameer also ordered that the Companies and Intellectual Properties Commission change the status of Bosasa on company records within two hours of receiving the court order, to prevent a "vacuum".

Bosasa/Gumede widely avoided mentioning in court papers that its two main sources of revenue, being two contracts with the Department of Correctional Services, have been cancelled.

Neither party traversed the very reason why Bosasa directors put the company under liquidation in the first place - the bank accounts.

Bosasa/Gumede did not provide the court with any information on whether or not it had sourced bank accounts. The liquidators also failed to provide the court with evidence that it was in fact, insolvent.

Ameer accepted Bosasa's version that the company was indeed solvent.

It is therefore likely that Bosasa's board will face difficulty in the daily running of the company in the very near future.


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