Edwafin provisionally liquidated

2009-05-23 00:00

THE high court in Pietermaritzburg has granted an order provisionally winding up the troubled Hillcrest-based investment company, Edwafin Holdings (Proprietary) Limited, and found that putting the company under judicial management is not the best option for investors.

Acting Judge Barry Skinner said in a reserved judgment yesterday that, given that Edwafin is a public company with some R200 million worth of investor’s funds, a judicial management order “cannot be in the nature of an experiment to see whether the company may well become successful”.

“The fact that any judicial management order would on the face of it have to last at least a number of years before the company could hope to repay all the debenture holders their capital and interest also suggests that the company is not capable of becoming a successful concern within a reasonable time,” he said.

Skinner said it is correct that the liquidating creditors — Dorothy Grifin of Howick and Theresa Chaplin — represent only a “small fraction” of the total debenture holders. However, he said there had been a delay of several months before the case was “ripe for hearing” by the court and various meetings of debenture holders were held.

“Accordingly if the silent majority opposed the liquidation of the company, they have had ample time to breach their silence.”

The judge said it is not disputed that creditors would receive about six cents in the rand on liquidation.

Advocate Eddie Lotz SC had argued in favour of a judicial management order, saying it is not just or equitable for a small proportion of creditors to force the company into liquidation, resulting in all creditors receiving a “minimal” return.

He suggested placing the company under judicial management would give an independent expert the opportunity to assess Edwafin’s financial position, for the body of creditors to establish their view towards the winding up of the company, and he submitted a short delay would not predjudice creditors.

However, the judge said it is equally possible the delay might cause further deterioration in the company’s finances with the added expense of a judicial manager.

Skinner agreed with the criticisms levelled by advocate Averil Potgieter SC of the financial projections presented by Edwafin in a bid to show that it could recover, and said these were “entirely too optimistic” in the light of the economic downturn.

Attorney Peter Bassett welcomed the winding up order yesterday and said the judge’s ruling vindicated the position taken by Griffin and Chaplin, despite the fact that some investors may well be unhappy.

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