Tug-of-war over Group 5
COURT: AIMING FOR BUSINESS RESCUE TO BE CONVERTED TO LIQUIDATION
BRPs will be opposing the high court application.
Forty-eight shareholders in Group Five have launched a Johannesburg High Court application to set aside various resolutions passed prior to the group going into business rescue, for alleged lack of compliance with the Companies Act and to convert the business rescue to a liquidation.
The identity of the 48 shareholders was not disclosed on Monday by business rescue practitioners (BRPs) Peter van den Steen and Dave Lake of Metis Strategic Advisors. The BRPs said Werksmans Attorneys will be opposing the application on behalf of the BRPs and the company.
Listing in the wind
The listed construction and engineering group was placed in business rescue and its shares suspended on the JSE in March last year. Group Five’s listing is to be removed from the JSE on Friday.
The BRPs said the 48 shareholders are seeking, among other things, that the court set aside:
The resolution adopted by the shareholders at an AGM on 7 November, 2017, which was 16 months prior to the commencement of the business rescue proceedings. In terms of these the company was authorised to provide direct or indirect financial assistance to one or more related or inter-related companies of the company for alleged lack of compliance with section 45(3)(a)(ii) of the Companies Act;
The resolutions of directors adopted on 2 May, 2018, in accordance with Section 74 of the Companies Act for the alleged lack of compliance with sections 45(3)(a) (i) and/or (b)(i) and/or (ii) of the Companies Act, and/or section 45(5) of the Companies Act;
The guarantee provided by the company to Standard Bank, Absa Bank, First Rand Bank, HSBC Bank and Boundary Terraces No 14 Proprietary Limited guaranteeing the financial obligations owed by Group Five to them; and
For the business rescue proceedings of the company to be converted to liquidation proceedings in terms of section 132(2)(a) (ii) of the Companies Act.
The BRPs added that attorneys representing the shareholders initially addressed a letter to them in July last year requesting information related to the financial and governance affairs of the company prior to the business rescue proceedings.
Information supplied
They said Werksmans Attorneys, on behalf of the BRPs, has provided the information they were entitled to receive. The BRPs said the shareholders’ attorneys then challenged the validity of the bank guarantee.
Group Five’s business rescue plan stated that the company and companies within the group guaranteed the repayment of a R650 million bridge loan and other financial obligations of Group Five to the financial guarantee providers. Following the termination of the Kpone power plant project in Ghana in 2017, the payment of $106.5 million (then about R1.5 billion) was demanded by Cenpower Generation Company from the financial guarantee providers. The banks paid the full value of bank guarantees in issue of $106.5 million to Cenpower, resulting in Group Five becoming indebted to the financial guarantee providers.
In responding to the challenge to the guarantee, the BRPs and Werksmans Attorneys sought the advice of senior counsel regarding the validity of the special resolution and the board resolution in terms of which the guarantee was issued.
“Senior counsel was of the opinion these complied with the provisions of the Companies Act. Accordingly, the BRPs maintain the guarantee is not void and not capable of being set aside.”