adminjudicial manager, having run the company’s affairs in the same capacity sometime in 2002.
Like other local textile companies, Merlin has been facing several challenges including working capital constraints and labour disputes.
The company has not been trading since early last year, the basis upon which the court was approached for the order of judicial management.
In granting the order, the High Court said: “The existing directors of the company be and are hereby divested of their powers and authority in such capacities and the same is vested in the provisional judicial manager. Any interested parties may appear before this court sitting at Bulawayo on the March 8 2012 to show cause why the final order should not be made placing the company under JM.”
Earlier, Merlin had filed an opposing affidavit arguing that the directors of the company had secured fresh capital to restart operations.
According to the company directors, Merlin requires about US$500 000 to resume operations. In the affidavit, the directors claimed they had secured US$650 000 to inject into the business, hence there was no reason to place it under provisional judicial management.
They further argued that there were negotiations with banks to write off certain “components” on interests and reschedule debts for at least six months.
Merlin had also reached an agreement with Zesa to reconnect supplies while negotiations with Old Mutual over outstanding rentals were in progress.
Judicial management is essentially a process that gives prime consideration to rescuing distressed companies as a going concern through the formulation and implementation of a reconstruction plan.
In other words, the process guarantees continuation of operations.
Any stakeholder can make an application for judicial management, but in most cases, creditors or shareholders file most of the applications. The placement of a company under judicial management can be a
testimony that the company has committed acts of insolvency.
A typical example generally applies when a company exhibits financial challenges by failing to discharge obligations as they fall due. Once an application has been filed with the court, the matter can be opposed by any stakeholder or otherwise. In the event that the application succeeds, a provisional court order will be granted pending the discharge of the same order on the return day, which shall not be less than 60 days from the
date the court order is granted.
Online Reporter