‘Utilise company rescue legislation’

so volatile and unpredictable.
The economic environment was characterised by hyperinflation and price controls by the State compounded by massive brain drain.
Resultantly, there was massive erosion of capital and lack of investment in plant and machinery.

The introduction of the multi-currency system in early 2009 created serious liquidity challenges, which slowed efforts to recapitalise companies, particularly those in the manufacturing sector.
The absence of foreign direct investment, lines of credit and the poaching alliance on exports caused a catastrophic liquidity crunch that has seen companies operating below capacity and huge losses.
Faced with this environment and difficulties, it is shocking that most corporate leaders are not aware of the provisions of the company rescue contained in the Companies Act (Chapter 24:03).

The Companies Act in Section 299 provides for the circumstances in which a company can be placed under judicial management to avoid its winding up.
The management of the company is replaced by a provisional judicial manager who is supervised by the Master of the High Court in running the company’s affairs.
He is made to enjoy a moratorium of debts in that in terms of Section 301 subsection 3, all actions and proceedings and execution of all writs, summons and other processes against the company are stayed and they may not be proceeded with without leave of court. The breathing space given to the company by this moral aligns for the formulation of a rescue plan and guarantees the continued operation of the company in the absence of pressing creditors.

In addition, the judicial management also opens the company to opportunities for injection of fresh shareholder funds without a threat of creditors.
Judicial management also benefits other stakeholders in that workers are ensured of continued employment, creditors are guaranteed through dividends as opposed to a partial payment that often occurs in

liquidation whilst suppliers are enabled to enjoy the opportunity of continuing with business with the company.
Furthermore, at this critical period where the country is battling to invite its fortunes, judicial management contributes to this by ensuring companies are protected.
The procedures for obtaining an order for judicial management are provided for in the Companies Act.

Firstly, any person who is entitled to make an application for winding up is entitled to make an application for provisional judicial management as provided in Section 299 as read with Section 207 of the Act.
The company or any creditor or creditors including contingent of prospective creditors contributory or these parties jointly may make an application to the High Court for an order placing the company under the provisional judicial management.

This provisional management will contain the return date where if there is no opposition is received, a final order is granted to place the company under judicial management.
Parties entitled to make an application for judicial management are also in terms of Section 314, entitled to make an application to the High Court for cancellation of the final judicial management order. This is

when the purpose of the judicial management order has been fulfilled or it has become undesirable that the order should remain in force.
The company will then be returned to the control of its management.

However, the company rescue legislation has surprisingly not been utilised in this jurisdiction as what happens in other countries.
It is a vital recommendation that these provisions of our law be utilised to rescue companies from collapse.