Corporate rescue gives lifeline to ailing companies

Rutendo Nyeve, Victoria Falls Reporter

WHILE the imposition of illegal sanctions from the West has seen the country experiencing economic headwinds that forced once-thriving enterprises to shut their doors, a legislative innovation is quietly scripting success stories of recovery and renewal.

The Insolvency Act (Chapter 6:07), signed into law by President Mnangagwa in 2018, has emerged as a pivotal game-changer, breathing new life into companies besieged by operational struggles and crippling debt through its corporate rescue provisions.

At the heart of this transformative process is the Office of the Master of the High Court, which oversees the administration of corporate rescue proceedings.

In an exclusive interview with Zimpapers, the Master of the High Court, Mr Eldard Mutasa, illuminated the profound impact this law has had on the nation’s economic landscape.

“In 2018, President Mnangagwa signed into law the new Insolvency Act. For the nation, this is a progressive piece of legislation because it introduced a new model of dealing with companies, which are going through financial distress,” he said.

“I am talking of companies, which, if there was no such a law introducing a corporate rescue model, could have gone under, and people would have lost their jobs. The economy would have been so much affected in the negative,” said Mr Mutasa. He explained that the corporate rescue model has effectively replaced the older system of judicial management, which was fraught with inefficiencies.

“It did not compel the judicial manager to come up with a rescue plan for the company. There were no timelines set for how long that management should run. But now with this new law, corporate rescue introduces a clear timeline that a company should be turned around within three months or 90 days, unless there are compelling reasons for which the practitioner can apply for an extension,” said Mr Mutasa.

“The idea is to save companies from collapse and we all know the benefits of doing so — people keep their jobs, new jobs are created and the economy functions.”

The efficacy of this legal framework is not merely theoretical. It is being proven in courtrooms and boardrooms across Zimbabwe, rescuing major employers and key players in critical sectors from the brink of oblivion.

A flagship example is the mining giant, Metallon Gold Zimbabwe. Along with its subsidiaries, Goldfields of Shamva and Goldfields of Mazowe, the group was placed under corporate rescue by the High Court.

This intervention has provided a structured opportunity to reorganise its substantial debts, stabilise operations and devise a sustainable plan to return one of the country’s largest gold producers to profitability, safeguarding thousands of jobs in the process.

The coal mining sector has witnessed a direct success story too. Makomo Resources, a vital supplier to the Zimbabwe Power Company and the nation’s energy sector, was officially removed from corporate rescue in February this year after successfully settling its debts and restructuring its operations.

Its exit marked a complete turnaround, demonstrating the model’s potential to not just stall collapse but to engineer a full recovery. The retail and manufacturing sector is also benefitting.

On August 7 2024, Truworths Limited and its subsidiaries, Topics Stores and Bravette Manufacturing Company, were placed under corporate rescue.

This move offers the prominent fashion retailer a fighting chance to re-organise its business model, manage its liabilities, and adapt to the evolving market, preserving an iconic brand and its employment footprint.

Most recently, the provisions of the Act were invoked for Khayah Cement Limited. Effective December 30, 2024, the company was placed under corporate rescue, with Mr Bulisa Mbano of Grant Thornton Zimbabwe appointed as the practitioner.

This intervention is crucial for stabilising a key player in the construction industry, whose survival is integral to national infrastructure projects.

The model has proved to be more compassionate and commercially astute alternative to liquidation.
It shifts the focus from the dismantlement of a company to its rehabilitation, balancing the interests of creditors, employees and shareholders.

For Mr Mutasa and his office, each successful case is a validation of the legislature’s vision.

“The objective is rehabilitation, not dissolution. It is about giving viable businesses a second chance and, in doing so, strengthening the very foundations of our economy,” he said.

As the nation continues on its path of economic development, the Corporate Rescue mechanism stands out as a legislation for sustainable growth, proving that with the right legal structures, even the most troubled companies can be brought back from the brink.