ANC heavyweights face scrutiny over Bosasa ‘benefits’ after court ruling
The provisional liquidators of African Global Operations, formerly Bosasa, have scored a legal victory, with the Supreme Court of Appeal (SCA) ruling, effectively, that the liquidation of six companies which scored unlawful contracts from the state can go ahead.
The court has also ruled that an auction of assets of the six companies, which raised about R113m, was lawful.
The rulings pave the way for the liquidation process to continue. This includes an inquiry into who benefited, and who should be held to financial account, for the millions scored through Bosasa’s corrupt dealings with the state which resulted, among others, in contracts with the department of correctional services, the Airports Company SA and the department of social development.
According to evidence before the Zondo commission of inquiry into state capture, they could include ANC heavyweights Gwede Mantashe, Zweli Mkhize and President Cyril Ramaphosa’s son, Andile Ramaphosa.
Others in the spotlight will be former COO Angelo Agrizzi and relatives of late Bosasa CEO Gavin Watson, who have been waging a “litigious battle” with the provisional liquidators.
SCA acting judge Piet Meyer, who penned the recent judgment, with four judges concurring, said the revelations made at the state capture inquiry about Bosasa, now known as Global Holdings, led to its banking facilities being withdrawn.
After Bosasa failed to find another bank, the directors of Global Holdings and Global Operations (a subsidiary) resolved to place Operations and its 10 subsidiaries under voluntary winding-up in terms of the Companies Act.
What ensued was a scurry of litigation in the main prompted by the liquidators wanting to sell assets of six of the companies, “the backbone of the group”, at public auction in December 2019.
Meyer said it had come to the attention of the provisional liquidators and the directors of the companies that there was a need to dispose of the assets expeditiously after the liquidators were advised cabinet had resolved that all service level agreements between departmental and state-owned companies and any companies related to the African Global (Bosasa) group must be terminated.
The six Bosasa companies had been awarded lucrative income-generating contracts. Most had already been terminated. Most significant assets were acquired to provide services in terms of the cancelled contracts.
The monthly insurance charges alone amounted to R150,000. Without the power to sell the assets, the companies would have to keep paying for these substantial assets.
Before their permanent appointment, and before a meeting of creditors, the liquidators applied to the court for an extension of their powers to allow for the sale of assets.
The directors agreed, but on condition that they be consulted and approve of any such sale.
They argued in their court papers that they had not given consent for the sale.
Then, in an apparent attempt to stop the sale, they launched proceedings the day before to place the companies in business rescue, which would allow them to trade their way out of trouble, and which, if approved, would nullify the liquidation proceedings and, in turn, the auction.
The auction went ahead regardless.
Much of the argument in the SCA turned on the interpretation of when a business rescue application is “made”.
Meyer said while there were conflicting versions, “I subscribe to the interpretation that [an application] must be issued, served on the company and each affected person to trigger the suspension of liquidation proceedings that have already commenced”.
“Each affected person, a shareholder or a creditor of a company, a registered trade union and individual employees, is entitled to oppose or support the business rescue application.
“It cannot be said, on a proper conspectus of the papers, that even now there has been compliance or even substantial compliance with the service and notification prescripts.
“It is common cause the Bosasa Group had about 4,500 employees. This was reduced to 50 employees after the voluntary winding up.”
On December 3 2109 only 29 employees were notified by electronic means of the business rescue application, Meyer said.
He said the application to stop the auction also ought to have been served on each of the joint liquidators of each of the six companies.
“I conclude the business rescue application was not ‘made’ within the meaning of the Companies Act and the suspension of the liquidation proceedings, including the public auction and subsequent sales, were not triggered.”
Regarding the assertion that the provisional liquidators did not have the power or consent to proceed with the auction, he said the liquidators’ powers had been extended by court.
“It could never have been the intention of the court hearing that application to have ordered the liquidators never to sell the assets without consultation or consent of the directors. Such a conclusion would be absurd. It would ignore the extended powers granted to the liquidators.”
The rulings will also pave the way for the continuation of a behind-closed-doors section 417 inquiry, headed by retired judge Meyer Joffe, to delve into the finances of Bosasa and probe allegations of wrongdoing by its directors.
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