Zimbabwean state-owned mobile provider Telecel has been placed under bankruptcy protection measures to avoid its liquidation as creditors are claiming their outstanding dues.
Zimbabwe government via Zarnet completed a shrewd acquisition of 60% stake of the telecommunication company and to date has failed to invest in the once most promising business entity, making it run for years without capital investiment.
In theory corporate rescue gives Telecel breathing space to sort out a rescue plan. But reports that it only accounted for $2 billion (US$5.5 million) or 2.6 percent of the total revenue of $76 billion (US$210 million) for the whole telecoms sector in Zimbabwe last year is worrying.
A notice to commence Corporate Rescue Proceedings in terms of section 124(2)(b) of the Insolvency Act [Chapter 6:07 (“the Act”) was gazetted last Friday.
Telecel’s assets, as of December 31, 2021, were $1.5 billion (about US$4.1 million) against total liabilities of $24 billion (about US$66.3 million) .
“Notice is hereby given to the shareholders, employees and other creditors of Telecel Zimbabwe (Private) Limited that a Court application for the placement of the above-mentioned company under supervision was filed with the High Court of Zimbabwe (Commercial Division), Harare, on the 10th of October, 2022 under Case H.C. 306/22.
“It follows, therefore, that Corporate Rescue proceedings have commenced in terms of section 124(2)(b) of the Insolvency Act [Chapter 6:07].
“In terms of section 125(1)(b) of the Insolvency Act [Chapter 6:07) corporate rescue proceedings are deemed to begin when an affected person applies to the Court for an order placing the company under supervision in terms of section 124(1) of the said Insolvency Act,” reads part of the notice.
According to the gazette, no action or proceedings shall be proceeded with or commenced against the company except by leave of the court and subject to such terms as the court may impose.
“Further, in terms of section 126 of the Insolvency Act (Chapter 6:07], during corporate rescue proceedings, no legal proceedings, including enforcement action, against the company, or in relation to any property belonging to the company, or lawfully in its possession. may be commenced or proceeded with, without the leave of the court,” it said.
Added to that, in terms of section 124(3) of the Insolvency Act (Chapter 6:07) each affected or interested party or person has a right to participate in the hearing of the application in terms of this section and may appear before the High Court (Commercial Division), to show cause why an order for corporate rescue proceeding should not be made placing the respondents under corporate rescue proceedings and ordering that the costs of these proceedings shall be the costs of corporate rescue proceedings.
Telecel is 60 percent owned by Telecel International, a wholly owned State entity, while 40 percent is owned by Empowerment Corporation (EC), a consortium of indigenous individuals and business groups.
Businesspeople, Dr James Makamba and Dr Jane Mutasa are major shareholders in EC. Apart from Dr Makamba and Dr Mutasa, some individuals and business groupings claiming to be shareholders, including businessman Dr Phillip Chiyangwa, Zimbabwe Farmers Union, National Miners Association, Indigenous Business Women Organisation and Magamba Echimurenga.
Mr Leo Mugabe and Mr Patrick Zhuwao, nephews of the late former President of Zimbabwe, Robert Mugabe, are also among prominent figures who were once declared legitimate shareholders in Telecel Zimbabwe.
the business neglecting country’s government would provide protection to Telecel in the event that its creditors take legal action.
The application listed Telecel’s assets as being worth US$1.5 billion as of end-2021, but noted that its debt at the time totalled US$24 billion. Mhambare argued that corporate rescue would allow Telecel to rebuild its business if it received a stay of execution against legal action.