Judge warns against abuse of judicial management process

Judge warns against abuse of judicial management process
The High Court of Zimbabwe.

The High Court of Zimbabwe.

Nyasha Chingono

A HIGH COURT Judge has warned struggling companies against using judicial management or provisional liquidation to evade payment of creditors, as the courts become inundated with such applications.
Speaking at the official opening of the Gweru High Court, Justice Martin Makonese urged struggling companies to seek other means of paying back creditors than applying for judicial management, a management process that allows a company to enjoy immunity from prosecution.
“The concern that I have is that, to some extent, there is an abuse of court process in that the majority of these applications are filed in order to evade payments owing of creditors,” said Makonese.
In the midlands, companies like Zimbabwe Alloys, Zimglass and recently the Zimbabwe Iron and Smelting Company (Zimasco) applied for judicial management after struggling to pay millions owed to creditors.
“There is a steady increase in the number of applications we receive at the High Court for judicial management and provisional liquidation,” Makonese said.
Last week, Zimasco’s bid to be placed under judicial management for failing to pay US$65 million to creditors was dismissed by the High Court after Justice Tawanda Chitapi argued that the company had failed to comply with Section 299 of the Companies Act on the submission of such applications to court.
The move by the High Court to dismiss Zimasco’s application was meant to discourage companies from resorting to judicial management.
Zimasco’s indebtedness to banks and other creditors increased from US$35 million to US$65 million in 2015, hence company management sought to protect the company’s assets from possible attachment.
Makonese also noted with concern the number of cases that are never finalised and sternly rebuked legal practitioners who frustrate the execution of judgments.
“Most applications for judicial management are filed and never pursued to the end once creditors have been frustrated and left to cling to Writs of Execution which they cannot enforce,” said Makonese.
Zimasco’s commercial director, John Musekiwa, said in December that judicial management was the only way the company could manage to pay its creditors.
“There is reasonable probability that if the company is placed under judicial management it will be able to properly pay its debts and turnaround its fortunes and it is also equitable it be placed under judicial management,” Musekiwa said.
Zimasco creditors include banks such as MBCA, Nedbank, Stanbic and CABS.
Due to economic challenges, companies have found the going tough, forcing many to default in payments to creditors.
Zimbabwe’s switch to the current multi currency system left many companies bankrupt and poorly funded.
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