Innocent Nyathi v Tagarira Brothers (Private) Limited and Others

Sukasihambe Special Express (Pvt) Ltd, a Zimbabwean company of which the appellant was a director, was placed under provisional liquidation on 6 April 2001. The third respondent was appointed provisional liquidator but could not perform duties until 11 October 2002 due to failure to furnish security. On 26 September 2002, the court ordered a creditors' meeting to consider proposals for discharging debts. At the 11 October 2002 meeting, the first respondent made the highest offer of $7,200,000 to purchase the company as a going concern. The appellant raised the same amount by 28 October 2002. On 7 November 2002, the provisional liquidation order was discharged by consent and creditors were paid $7,200,000. On 6 December 2002, after the provisional liquidation was discharged, the third respondent (no longer a provisional liquidator) purported to enter into an agreement with the first respondent to sell the company's assets for $7,200,000. On 17 December 2002, the first respondent applied to the High Court for an order declaring it the purchaser and directing transfer of assets, which was granted on 27 November 2003.

• Whether the court could make an order against a company that was not cited as a party to the proceedings
• Whether the provisional liquidator had power to sell the company's assets without express authority from the court or the Assistant Master
• Whether creditors had power to accept an offer for the purchase of a company's assets under provisional liquidation
• What was the effect of the discharge of the provisional liquidation order on ownership and control of the company's assets
• Whether a valid sale of the company's assets had occurred

The appeal was allowed with costs. The judgment of the High Court was set aside and substituted with an order dismissing the application with costs.

A provisional liquidator does not have the power to sell, deliver or transfer the movable and immovable assets of a company under provisional liquidation unless such power is expressly granted by the Master (in the letters of appointment) or by the court. The power under section 221(2)(h) of the Companies Act must be specifically authorized and cannot be implied. Creditors of a company under provisional liquidation have no legal power to enter into agreements for the sale of the company's assets - only a provisional liquidator or liquidator with proper authority can effect such sales. Upon discharge of a provisional liquidation order, ownership and control of the company's assets revert to its shareholders and directors. A court cannot make orders affecting a company's property rights without the company being properly cited as a party to the proceedings.

The Court noted that leave to exercise powers under section 221(2)(h) of the Companies Act is ordinarily granted to a liquidator after a final winding-up order has been made, suggesting the legislative and judicial practice is to restrict such powers during provisional liquidation. The Court also observed that the second respondent's deliberate exclusion of the power to sell assets from the third respondent's letters of appointment indicated clear intent that she could not sell, deliver or transfer company assets without court leave.

This case is significant in Zimbabwean company and insolvency law as it clarifies the limits of a provisional liquidator's powers, particularly regarding the sale of company assets. It establishes that: (1) a provisional liquidator cannot sell company assets without express authorization from the court or Master; (2) creditors have no power to effect sales of assets of a company under provisional liquidation; (3) once a provisional liquidation order is discharged, control and ownership of assets revert to the company's shareholders and directors; and (4) proper parties must be cited in court proceedings affecting their rights. The case reinforces the principle that the powers of provisional liquidators are strictly circumscribed by statute and the terms of their appointment.