Did Bosasa just shoot itself in the foot? Why the company wants to reverse liquidation

2019-03-13 10:32
High Court. (Duncan Alfreds, News24, file)

High Court. (Duncan Alfreds, News24, file)

Multimedia   ·   User Galleries   ·   News in Pictures Send us your pictures  ·  Send us your stories

The reasons for corruption accused company Bosasa's complete about turn after placing the group of companies under voluntary liquidation in February are likely to revolve around concerns over what wrongdoing may be uncovered.

The board of African Global Operations, previously named Bosasa, took a resolution on 12 February to place itself and other subsidiaries under voluntary liquidation.

On 4 March 2019, Bosasa chairman Joe Gumede, representing his co-directors and Bosasa/AGO's parent company African Global Holdings, filed an urgent application in the South Gauteng High Court in Johannesburg seeking to have the provisional liquidators removed and the entire liquidation process reversed.

READ: The minister, the gifts, the Watsons and the wind farm

A detailed reading of court papers has offered little in the way of explaining the motivation behind the move, instead offering only the mechanics on which Gumede hopes the court will base its decision.

What is clear is that Bosasa wants provisional liquidator Cloete Murray gone, but the reasons are far more likely to be because of fears surrounding what he may uncover.

The Master of the Court first appointed Murray, and later Ralph Lutchman and Tania Oosthuizen as the provisional liquidators. A host of others have since been appointed to oversee the winding up of the other subsidiaries.

The matter was scheduled to be heard on Tuesday, but was postponed until Wednesday morning.

The main question is why. Why are Bosasa's directors, after placing the company under voluntary liquidation, now so determined to see the back of Murray in particular?

The Bosasa board took the decision to commence liquidation proceedings following a decision by FNB and ABSA to shut down its banking facilities amid growing concerns over the reputational risks associated with banking Bosasa, as is clear from a press statement issued by the company.

This follows two weeks of extensive testimony by former Bosasa COO Angelo Agrizzi before the state capture commission of inquiry during which he revealed shocking allegations of bribery, fraud, tax fraud and corruption spanning nearly two decades.

What is clear, is that they want Murray gone. This, Murray says in opposing papers, is evidence of the independence of the liquidators.  

The basis

The essence of Gumede and Bosasa's argument for the reversal of the liquidation is based on their averment that the resolutions adopted by the Bosasa board on 12 February 2019 are null and void.

Gumede argues that based on misguided legal advice, the board met and simply signed documents they "believed" to be correct to commence liquidation.

It follows then, Gumede argues, that the appointment of the liquidators was irregular. While it is within Bosasa and Gumede's rights to make this argument, it is rather shocking that the entire board of Bosasa would sign documents to place the company under liquidation, only to now turn around and say they effectively did not understand what they were signing.

The resolutions, Gumede argues, are null and void because the actual documents refer to sections in the Companies Act that have since been updated.

The courts however, still recognise this section of the act.

For his part, Murray argues that the grounds set out by Gumede fall short of requirements to prove on a factual basis that Bosasa and its subsidiaries are in fact solvent.

News24 has studied the court papers and found that Gumede does not set out any facts as to why the companies are still solvent. He also does not deal with the most substantial hurdle – the bank accounts.

The closure of the bank accounts was provided as the main reason why the company was being placed under liquidation. Gumede does not advance proof that new bank accounts have been found.

Neither does he deal with the fact that Bosasa's main stream of revenue – contracts with the Department of Correctional Services (DCS) – has been cut off.

DCS has cancelled these contracts.

Murray argues that Gumede has provided no grounds to prove to the court that Bosasa can commercially operate, or is in any way actually solvent.

The crux

Murray mentions on a few occasions in his papers that it is the very independence of himself and the other liquidators that is making the Bosasa directors "uncomfortable".

The liquidators have broad investigative powers and by the nature of their appointment, have access to financial information.

This is evidenced by Murray's revelations that Bosasa CEO Gavin Watson was paid a R5m "performance bonus" on 30 January 2019.

It is far more likely that this court application was brought by Bosasa because it did not account for the fact that an independent liquidator spells far more trouble than evidence before the state capture commission at this stage.

Bosasa's secrets are ready to be laid bare by Murray and his colleagues.

In bringing this application Gumede and his fellow directors at Bosasa may have ensured their own downfall.

Murray argues that in order for them to actually bring the application the high court must order that Murray and other liquidators be appointed fully, and not provisionally. He has asked the court to do this.

It is an application Murray would no doubt have brought on his own steam in the near future. But in order for him to be properly recognised as a respondent, his appointment first needs to be confirmed, before the court can hear the main application brought by Bosasa. 

By bringing this application, Bosasa may have shot itself in the foot by giving Murray an opportunity to have his appointment made an order of the court. Bosasa has dealt with this counter application in very simple terms, by claiming it to be irregular.  

In the interim Murray has filed a 107-page liquidator's report confirming the reasons why Bosasa is insolvent. The matter is set down to be argued on Wednesday morning.

Read more on:    bosasa  |  joe gumede  |  gavin watson  |  state capture inquiry

Join the conversation!

24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.

Inside News24

Traffic Alerts
There are new stories on the homepage. Click here to see them.


Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.


Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.