DW insolvent: Shareholder

a High Court application seeking the firm’s liquidation because it was “insolvent”.
The application coincided with another High Court application by provisional judicial manager, Mr Winsley Militala. He is seeking to nullify the decision by the Master of the High Court, Mr Charles Nyatanga to dismiss him.
The High Court reserved judgment on Mr Militala’s application while the liquidation application was postponed to tomorrow. David Whitehead was placed under provisional judicial management in December last year. The final order was to be confirmed on the return date of March 2 this year.
At a creditors’ meeting, it was unanimously resolved to extend the order indefinitely and waive the return date of Mach 2 accordingly.
However, Mr Nyatanga wrote to the provisional judicial manager indicating that since the order was neither confirmed nor extended by the High Court, that technically meant the provisional order had lapsed. Mr Militala was then supposed to hand over the company to shareholders.
Merspic Enterprises, a five percent shareholder in the textile firm argued in its liquidation application that the resolution to indefinitely extend the order was “fraudulent”.
It said since Mr Militala’s report showed the company was beyond revival, there was no point in extending the reconstruction process.
“The meeting noted that the liabilities at US$11,6 million, were almost three times more than the value of assets at US$4,3 million.
This coupled with the closure of the company’s operations in August 2010, the failure to pay its liabilities, including wages, salaries and retrenchment packages (and that) was adequate proof that the company in insolvent,” said Merspic.
Merspic said the position taken by creditors and shareholders was to fraudulently give Mr Militala time to alter his report in order to mislead the High Court that the company’s fortunes could be turned around.
Citing Mr Militala’s report, Merspic noted the textile firm was under pressure from the flooding of cheap Asian textile products. David Whitehead was not the only firm affected, other textile companies in southern Africa had also been hard hit.
Meanwhile, recommendations have been made to appoint a reputable firm of chartered accountants to establish whether Elgate, the majority shareholder in DWT, fully paid up US$5,4 million for the 51 percent stake in the company.
Elgate won the bid ahead of four other investors to buy the majority stake of the company. It was recommended that a proper investigation be carried out to establish the collapse of the company and the allegation of asset stripping.
Mr Militala’s report alleged that Mr Toendepi and his finance director, stripped the company’s assets, including a property in Harare and equipment in factories which was sold as scrap.
The company had indicated that it would dispose of some assets to raise funds to pay about 630 retrenched workers.
The report said the directors pocketed the proceeds from sale of assets.
“The chief executive (Mr Andrew Toendepi) is alleged to have taken the company staff bus and added it to his transport fleet operating as Underhill,” according to the report.
“Until there has been a proper handover of all of the books of accounts of the companies by the two executives, it is difficult to ascertain what assets have, in fact, been unlawfully removed, to where and by whom and whether they might have been disposed of and for what consideration and what happened to the proceeds of the disposals.
“A good example is that the net proceeds of a company property with a clause stating that the net proceeds of sale be deposited into a shareholder’s personal banking account. This calls for a thorough investigation into all the disposals by the company.”
Mr Militala said apart from the problems at DWT, the textile industry in Zimbabwe had been facing a lot of challenges.
“The closure of David Whitehead Textiles Limited and Cotton Printers, a subsidiary of Kingdom Meikles, which is in the process of liquidation, bears testimony of the effects of such challenges on the industry,” said the report.
DWT was placed under judicial management for the second time in five years, on December 1 last year, after the High Court lifted another similar reconstruction scheme in 2008.