The applicants are joint liquidators of Micro Carbon Alloys (Pty) Ltd (MCA South Africa), a South African company and creditor of MCA Venture Capital (Private) Limited (under Corporate Rescue), a Zimbabwean company. On 4 March 2020, MCA Venture Capital was placed under corporate rescue with the first respondent appointed as Corporate Rescue Practitioner (CRP). MCA South Africa's claim of US$3,132,307.00 was accepted and later reduced to US$2,139,220.59. A Corporate Rescue Plan was approved whereby creditors would receive 28.53% of their claims, entitling MCA South Africa to US$610,319.47. A consent order dated 16 March 2022 required the first respondent to pay the dividend to MCA South Africa's South African bank account, subject to Exchange Control Approval from the Reserve Bank of Zimbabwe. The first respondent applied for Exchange Control Approval through CABS, which requested additional information that was never furnished. The approval was not granted. The first respondent subsequently utilized the funds for corporate rescue costs, including his fees, security costs, and renewal of mining claims. The applicants sought the first respondent's removal as CRP on grounds of incompetence, failure to perform duties, illegal conduct, and conflict of interest.
The application was dismissed with costs. The court found no grounds established for the removal of the first respondent as Corporate Rescue Practitioner.
A Corporate Rescue Practitioner cannot be removed from office under section 132 of the Insolvency Act [Chapter 6:07] where: (1) the CRP's obligation to pay creditors is subject to a suspensive condition (Exchange Control Approval) that has not been fulfilled through no fault of the CRP; (2) the CRP has applied for requisite regulatory approvals and additional information requested by authorities was not provided by the company or creditors; (3) the approved Corporate Rescue Plan permits the CRP to deduct corporate rescue costs before distributing dividends to creditors; (4) the CRP's remuneration and expenses are legitimate corporate rescue costs with priority ranking under section 136(5); and (5) the applicant has failed to prove on a balance of probabilities any of the specific grounds for removal set out in section 132(2), namely incompetence, failure to perform duties, failure to exercise proper care, illegal conduct, or conflict of interest. The removal of a CRP is discretionary and requires proof of actual or potential prejudice to the company or creditors' interests, and is not to be ordered lightly.
The court observed that: (1) Section 67 of the Insolvency Act does not apply to corporate rescue proceedings as it deals with liquidation proceedings - corporate rescue is governed by Part XXIII of the Act; (2) a court order has the force of law and remains binding on parties unless and until it is set aside or varied, and parties cannot vary it even by consent; (3) heads of argument are not pleadings and a case is not made in submissions but in the founding affidavit; (4) negligence must be specially pleaded with particulars in the founding affidavit; (5) the court determines only issues placed before it by parties through pleadings and cannot exceed that mandate; (6) bald and unsubstantiated allegations cannot establish a party's position; (7) the CRP accounts primarily to creditors, stakeholders, and the Master, and the court should allow the Master to deal with accounting issues under his purview before intervening; and (8) a CRP must be held to a high professional and ethical standard and must act objectively, impartially, and independently without being dictated to by directors, shareholders, or any third party.
This judgment is significant in Zimbabwean corporate rescue jurisprudence as it clarifies the high threshold required for removal of a Corporate Rescue Practitioner under section 132 of the Insolvency Act [Chapter 6:07]. It establishes that: (1) removal of a CRP is not to be ordered lightly and requires proof of actual or potential prejudice; (2) the CRP's obligation to implement a corporate rescue plan is subject to legal requirements such as Exchange Control Approval; (3) the CRP is entitled to prioritize corporate rescue costs, including remuneration and expenses, in accordance with the approved plan and section 136(5); (4) failure to meet creditor expectations does not automatically constitute incompetence or grounds for removal; (5) the court will not interfere in matters still pending before the Master of the High Court; and (6) the grounds for removal under section 132(2) must be specifically pleaded and proved with reference to particular facts, not mere speculation or general allegations. The case also confirms the application of South African jurisprudence on removal of insolvency practitioners to Zimbabwean corporate rescue proceedings.