Steinhoff set to appeal judgment that it breached the Companies Act in 2019

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The Western Cape High Court found that Steinhoff breached a provision of the Companies Act in 2019.
The Western Cape High Court found that Steinhoff breached a provision of the Companies Act in 2019.
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  • Steinhoff is planning to appeal a High Court judgment that found it breached a section of the Companies Act in August 2019.
  • Steinhoff says that, in the absence of a successful appeal, the ruling will result in a complicated series of new legal disputes it can ill afford. 
  • The group is already facing a complex web of court challenges in SA and Europe as it seeks to finalise a multibillion-rand settlement process with claimants.

Retailer Steinhoff is planning to apply for leave to appeal a recent court judgment that found it breached a section of the Companies Act two years ago. 

Steinhoff said the ruling had resulted in "greater uncertainty" and more claims against it. In the absence of a successful appeal, Steinhoff said the judgment would also result in a "long and complicated series of multi-jurisdictional legal disputes".

The furniture and household goods conglomerate is already facing a complex web of interrelated court challenges in South Africa and Europe, as it seeks to wrap up a tricky multibillion-rand settlement process with claimants who lost out in its share price plunge. 

Steinhoff said it believes it has "reasonable prospects of success" on appeal. The process could, however, take "several months" to be finalised.

Caught in the act 

Earlier this month, Western Cape High Court Judge Lee Bozalek found that Steinhoff breached a provision of the act in August 2019 when it provided financial assistance to an entity in its stable.

According to the act, boards can only take on new debt or provide new financial assistance if they are satisfied their company can pass a solvency and liquidity test.

However, according to Judge Bozalek, Steinhoff's directors would at the time have "had difficulty in satisfying themselves" that the company could pass the test. 

Bozalek was unconvinced by Steinhoff's argument that it had merely deferred or "restated" existing debt and had not provided new inter-company financial assistance.

Global settlement 

As Fin24 previously reported, Bozalek's ruling raised questions over how it would impact Steinhoff's settlement process.

The retailer is hoping that paying out billions of rands to litigants will free it from the ever-present threat of costly and time-consuming court challenges. 

The group's settlement proposal initially involved paying out €943 million to claimants. This was last week upped to €1.23 billion due to "improved financial performance". Additional contributions from insurance groups and former auditors will further increase the pot. 

But, as Bozalek noted in his ruling, the settlement process may have to be "revisited" following this judgment.

Steinhoff, meanwhile, has again urged claimants to stick with the settlement process, saying that it represents the best offer that litigants and creditors will get.  

"Steinhoff urges stakeholders to avoid further delay and to support progress of the proposals for approval by claimants and the courts."

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