Founder Turnaround Talk
We are currently seeing the Golden Age of Business rescue with a number of high profile cases going through the courts.
The National Union of Metalworkers of South Africa (NUMSA) intends to make application (Notice of Motion Exclusive Jurisdiction Application, alternatively, Application for Direct Access) to the Constitutional Court of South Africa regarding the liquidation of various State Owned Assets.
Reason for the application
According to the application, NUMSA applied for an order in the following terms:
- It is declared that the Constitutional Court has exclusive jurisdiction under section 167(4)(e) of the Constitution to hear this matter, alternatively NUMSA is granted direct access in terms of section 167(7) of the Constitution, read with Rule 18 of the Constitutional Court Rules;
- The following questions must be placed before the National Assembly (“NA”) Portfolio Committees on Public Enterprises and Public Accounts, or such other committee or combination of committees convened for this purpose by the First Respondent, for a decision in terms of rule 228(2) read with rule 246 of the Rules of the NA: Whether South African Express SOC Limited (SAX) (in provisional liquidation) should be permitted to be finally wound-up; and whether it is still the policy, as enunciated in the Preamble of the South African Express Act, 2007, to retain South African Express as a strategic asset to enable the State to preserve its ability to provide frequency of services on lower density routes; and whether the State still desires to contribute to the expansion of regional air service capability within South Africa and to the African continent and the surrounding islands;
- The question whether Denel SOC Limited (Denel) should be permitted to be wound up or placed in business rescue or otherwise go insolvent, must be placed before the NA Portfolio Committees on Public Enterprises and Public Accounts, or combination of committees convened for this purpose by the First Respondent, for a decision in terms of rule 228(2) read with rule 246 of the Rules of the NA;
- Pursuant to the decisions in 2 and 3 above, the House must pass a resolution on the questions whether: it is still the policy as enunciated in the Preamble of the South African Express Act, 2007, to retain South African Express as a strategic asset to enable the State to preserve its ability to provide frequency of services on lower density routes; and whether the State still desires to contribute to the expansion of regional air service capability within South Africa and to the African continent and the surrounding islands, and if not, legislate accordingly; and SAX and Denel should be permitted to be wound up or placed in business rescue or otherwise go insolvent;
- Declaring that no “Major Public Entity” as envisaged in Schedule 2 to the Public Finance Management Act, 1 of 2009, read with Sections 1 and 8 of the Companies Act, 71 of 2008 in respect of State Owned Companies, should be permitted to be wound up or placed in business rescue or otherwise go insolvent without the matter first being submitted for a decision in terms of rule 228(2) read with rule 246 of the Rules of the NA, to the NA Portfolio Committees on Public Enterprises and Public Accounts, or a combination of committees appointed for this purpose by the First Respondent, and the House must passed a resolution pursuant to such decision on the question as to whether or not the relevant State Owned Company should be permitted to be wound up or placed in business rescue or otherwise go insolvent;
- Costs, but only in the event of opposition to this application, and only against those persons so opposing; and
- Further and/or alternative relief.
Purpose of this application
At present, South African Express (SOC) Ltd (SAX) is on its last feet. It was placed under business rescue, which could not be proceeded with due to the lack of funding going forward. It was placed in provisional liquidation as a result. An extended return date to make the interim liquidation final was set down for 29 April 2021 but was extended to 28 July 2021, inter alia for the purposes of affording NUMSA the opportunity to first institute this application. SAX is accordingly on the brink of liquidation.
Denel SOC Ltd (Denel) finds itself in dire financial straits. It is insolvent and arguably trading recklessly.
This is happening in circumstances where Parliament has not had its say. And it is Parliament, ultimately, which must determine whether SAX or Denel or, for that matter, any other State-Owned Company should be permitted to go insolvent.
The purpose of this application is therefore to compel the National Assembly’s (“NA”) Portfolio Committee on Public Enterprises (“PE Committee”) and Standing Committee on Public Accounts (“SCOPA”), or such parliamentary committee or committees convened for that purpose by the First Respondent, to hold public hearings, and entertain submissions, on the question whether SAX and Denel, or any other similarly placed major state-owned company (“SOC”) in financial distress, should be permitted to go insolvent and, consequently, be finally liquidated by a court, as more fully set out in the Notice of Motion.
The material portfolio committees must take a decision on the question whether SAX and Denel should be permitted to go insolvent (and, because of the same underlying principles, likewise any other company listed in Schedule 2 to the Public Finance Management Act, 1 of 1999, (“PFMA”) which may similarly be confronted with potential insolvency). Pursuant to this decision,
the House must pass a resolution on the question.
Parliament is obliged to conduct such hearings, entertain submissions, and take a decision on the question. It has not. This Court should order the NA to act in fulfilment of its constitutional duties to oversee the actions of the Executive and of SOCs, and, importantly, to hold them accountable in a meaningful way for the failures of SAX and Denel (and by necessary implication any other similarly placed major public entity).
The full application can be read here.
