– The Herald
The High Court has dismissed an application by Edwin Chimanye, one of the shareholders of David Whitehead Textile Ltd, seeking to have the judicial manager removed.
Chimanye, also the former CEO of the company, had sought the removal of Knowledge Hofisi of Aurifin Capital arguing the tenure of the judicial management had caused more “harm than good” to the company’s shareholders and creditor.
David Whitehead was placed under provisional judicial management in December 2010 and the final order was confirmed in 2014.
Agri Value Chain bought about 74 percent of the company’s shares in 2019 but work on resuscitating once country’s largest textile firm was delayed due to the pending court case.
The dismissal of the application means the new investor, who has already made significant strides in paying off the creditors, can now proceed with reviving the company.
Hofisi was cited as the first respondent.
David Whitehead, Master of High Court and workers representatives Marumanzeve Charumbira, Shen Musapuri and Tadious Maweto, were cited as second, third and fourth respondents respectively.
The relief sought by the application was in terms of Section 301(1) of the Companies Act.
In opposing the application, Hofisi argued the application was fatally defective and needed to be struck out as the law cited does not provide for the remedy sought.
Fourth to sixth respondents added their voice to the effect that in any event, the removal of the judicial manager does not require leave in terms of Section 313.
In any case, it is Section 305 of the Companies Act, which provides such powers but to the court or a duly authorised representative of the majority of the creditors.
Justice Chirawu ruled that Section 301(1) does not ground an application for the removal of the final judicial manager. It provides for the contents of the provisional order.
In addition, suing the company under judicial management was misplaced since the process is supposed to be protecting the assets of the company from being attached over debts.
“It seems to me that applicant is totally misconstrues the rational behind to seek leave to sue the company under the judicial management or in liquidation.This requirement is to protect . . . or maintain the status quo so as to preserve and protect the assets of the company for the benefit of its creditors and shareholders.”
David Whitehead plays an integral part in the entire cotton value chain in Zimbabwe. Currently, Zimbabwe is exporting 80 percent of lint because of low uptake by the struggling textile industry.
The company was incorporated in 1951, with the name David Whitehead & Sons (Rhodesia) Limited. However, it changed its name to David Whitehead Textiles Limited in 1979.
It is listed on Zimbabwe Stock Exchange in 1971.
Following Lonrho Africa’s disinvestment from the textile industry in 2002, DWTL’s management consortium comprising senior managers spearheaded the acquisition of 88 percent of the issued and fully subscribed ordinary share capital in the company.
The acquisition was made through an investment vehicle called Guscole Investments, which had Chimanye, Ernest Chivaura, Ian Cripps, George Maulidi, John James Fergusson, Oliver Gwaku and Ms Daphne Ritson on board.
Between 2002 and 2006, Chimanye was the chief executive officer of the company.
However, in 2005, the company was suspended from the ZSE after failing to publish audited financials and regularising its shareholding structure in conformity with the listing requirements.
The company was first placed under the judicial management of Dr Cecil Madondo between May 2006 and April 2008. During that period, Elgate Holdings won a competitive bid to acquire new shares, which translated to 51 percent in DWTL, for US$5,4 million.
That had an effect of diluting Guscole Investments’ shares.
However, Elgate only paid US$1,6 million to DWTL, according to a forensic audit by Dr Madondo.
Following the cancellation of the first judicial management in April 2008, the company was handed over to Elgate Holdings, principally owned by Andrew Toendepi.
He is alleged to have stripped the company’s assets, dismantled a total of 300 looms and exported them as scrap metal.
Toendepi is also alleged to have sold the company’s property in Harare.
Two years later, the company was placed under provisional judicial management for the second time. For the following three years, there were several litigation cases, judicial manager Winsley Militala (the late), recommending the company’s liquidation due to lack of investor interest. But in March 2014, the High Court granted the final judicial management order after a business rescue plan was prepared by Hofisi.
And in April 2019, an order for the forfeiture of the shares previously issued to Elgate Holdings was granted by the High Court.
A month later, the forfeited shares were then sold in terms of the Articles of Association of the company.
Before AVCZ came on board as an investor, the company was sliding into insolvency.
ZAMCO and Parrogate were owed $2 million and $3 million respectively. These debts were secured against DWTL’s Chegutu and Kadoma factories — the company’s main assets. The two were contemplating foreclosure proceedings when AVCZ came to DWTL’s rescue.