Fidelis Munyoro, Harare Bureau
The placement of Hwange Colliery Company Limited (HCCL) under reconstruction is facing stiff opposition, with some directors contesting Government’s decision aimed at reviving the giant coal mining firm. Government announced in October last year that HCCL would be placed under reconstruction.
DBF Capital co-founder, Mr Bekhitemba Moyo, was appointed as the administrator tasked with leading the turnaround of the distressed coal mining firm.
Five directors; Juliana Muskwe, Ntombizodwa Masuku, Edward Tome, Andrew Lawson and Messina Investments Limited, have teamed up to oppose the confirmation of the reconstruction order at the High Court.
Government has a 42 percent controlling stake in HCCL.
In terms of the Reconstruction of State-Indebted Insolvent Companies Act, the responsible minister has powers to issue a reconstruction order if it appears to him that by reason of fraud or mismanagement, a state-indebted company is unlikely to be able to make any repayment of a credit made to it from public funds.
Justice David Mangota heard arguments from the parties’ lawyers and reserved judgment.
Justice, Legal and Parliamentary Affairs Minister Ziyambi Ziyambi, represented by Advocate Tembinkosi Magwaliba had applied for the High Court to confirm the reconstruction order.
Adv Magwaliba argued that HCCL was unable to pay its debts.
He argued that there was reasonable probability that if the company was placed under reconstruction, it will settle its debts in full, meet its obligations and become a successful concern.
“At the heart of the applicant’s actions is the desire to save a state asset from collapsing,” said Adv Magwaliba.
“The importance of Hwange to the nation cannot be overstated. It has a key role to play in the restoration of Zimbabwe’s economy.”
Adv Magwaliba argued that it was important that measures be taken to help the entity to be restored to its status as a going concern.
But the five, who are being represented by Advocates Thabani Mpofu and Lewis Uriri, want the court to dismiss the reconstruction order.
It is their argument that HCCL is under a Scheme of Arrangement in terms of section 191(3) of the Companies Act, lawfully sanctioned by the High Court order under HC 5012/16.
The court order sanctioning Hwange’s creditors Scheme of Arrangement still exists.
“Other than approaching the court for confirmation of the reconstruction order he issued (Minister Ziyambi), applicant has not made out a case warranting the confirmation of the said order,” said Adv Mpofu.
“The court must therefore dismiss this application and restore the status quo as at October 25 2018.”
Adv Uriri weighed in arguing that the application was “self-centred, it is meant to aid a single creditor to what is akin to self-help under the guise of legislative powers without balance whatsoever to the interests of the other creditors.”
He urged the court to refuse an attempt by the minister to allegedly abuse the legislative authority.
The coal mining firm, which has been dogged by corporate governance deficiencies, is reported to be insolvent and owing the Government in excess of $150 million.
The situation has been compounded by the firm’s defaulting on the scheme of arrangement it entered into with creditors.
HCCL’s reconstruction has also empowered the administrator to raise funds in any way without the authority of the shareholder for the purpose of reconstruction, subject to the rights of the creditors of the company.