The High Court has dealt a major blow to troubled mining giant RioZim Limited, ruling that the company cannot sell off its assets while under corporate rescue proceedings - a legal process meant to save firms from total collapse.
Justice Regis Dembure has dismissed RioZim's application to appeal an earlier order stopping it from disposing of mines and other key assets, saying the company had "no legal leg to stand on."
"The mere filing of the application with the Registrar of the High Court, even before the merits of the application are considered, has the effect of commencing corporate rescue proceedings," Dembure said, citing earlier rulings in the Metallon Gold case.
In simple terms, once a company files for corporate rescue, its hands are tied: it cannot sell assets, restructure freely, or dodge creditors without court oversight.
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RioZim's lawyer, Advocate Thabani Mpofu, had argued the company's board should still be allowed to make operational decisions while waiting for a rescue practitioner to be appointed.
"This board is alive; the provisions of section 127 should not prevent it from making necessary operational decisions to avoid financial distress," he argued.
But the Zimbabwe Diamond & Allied Minerals Workers' Union, which brought the case, hit back.
"The company cannot just choose which legal provisions apply to its convenience during its financial turmoil," said lawyer T.L. Mapuranga. "The notion that the board can operate unrestricted is a gross misinterpretation of the law."
Justice Dembure agreed with the union, ruling that RioZim's bid was "without merit" and ordering the company to pay legal costs.
The decision comes as RioZim faces mounting pressure from workers it owes over US$37 million in unpaid wages and benefits. More than 200 employees recently won an arbitration award, but their victory has also been thrown into limbo.
In another recent judgment, Justice Catherine Bachi Mzawazi struck the case off the roll after RioZim's lawyers argued the award could not be enforced because the company is under corporate rescue.
"The law is indeed an ass, so they say," Justice Mzawazi remarked. "The respondent tactfully sought refuge from the law at the detriment of the employees' rights... yet the law is the law nonetheless."
She said corporate rescue temporarily freezes all lawsuits until the process is completed - usually within three months.
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"Corporate rescue is a lifeline thrown to enable a company in financial distress to be rehabilitated in order to make a financial turnaround so as to meet its obligations," she explained.
