Founder: Turnaround Talk
In a featured article on Turnaround Talk yesterday, we pointed out the dangers of making a statement that there is a crisis of trust in the industry and applying it to every BRP or Turnaround Professional.
Less than 24 hours after publishing this article, word came through of a court judgement that highlights the examples of the abuse that Deloitte refers to in the 2022 Restructuring Survey.
In a circular to its members, an industry association points out that SARS obtained judgments against Louis Pasteur Investments (LPI) under the Tax Administration Act and the Value Added Tax Act. In 2012 LPI was placed in business rescue and Mr Naude, the business rescue practitioner, proceeded with the rescue. Five years into the business rescue plan, SARS brought an application seeking an order converting the business rescue to liquidation proceedings and for the winding up of LPI. Mr Naude resigned as practitioner and Mr Prakke was later appointed. In 2021 an order was granted converting the rescue proceedings to liquidation proceedings and placing LPI into provisional liquidation.
Millar J discusses the application for final winding up; s 132(2)(a)(ii) of the Companies Act 71 of 2008; the lifting of the moratorium of legal proceedings; the creditor’s right to apply for liquidation at any time on good cause shown; Ms Mia’s late application to intervene; that LPI was and is hopelessly insolvent; and costs.
The court notes that a business rescue practitioner is also an officer of the court and expected to conduct himself with the utmost good faith. As soon as it is apparent that the company is unlikely to continue then he must apply to convert the business rescue to liquidation proceedings. Despite having initially correctly identified that the rescue plan was nothing more than a sham, he made a volte face and chose to oppose the granting of a final winding up order. The way in which Mr Prakke conducted himself after he had reported to the court the state of affairs of LPI was neither bona fide nor reasonable.
LPI is placed in final winding up and a de bonis propriis costs order is made against Mr Prakke on the scale between attorney and client.
The judgment can be downloaded below.
