The first applicant, a German company, purchased the entire undertaking and assets of the second applicant (a Zimbabwean company) through a scheme of arrangement whilst the second applicant was under judicial management between 12 September 2012 and 4 December 2019. The judicial manager, Christopher Masawi, facilitated the sale and the first applicant paid creditors and advanced loans. The first respondent lodged a CR14 form on 31 March 2017 (during the judicial management period) purporting to appoint himself as director and shareholder of the second applicant. After the late husband of the first applicant's director passed away, the first respondent took advantage and held himself out as a director and shareholder, disrupting the second applicant's operations, threatening to enter contracts, harassing employees, demanding mining certificates, and stealing company property. The applicants sought declaratory relief that the first respondent was not validly appointed as director or shareholder.
1. The CR14 lodged by the first respondent on 3 April 2017 declared null and void. 2. Declared that the first respondent is not a shareholder or director of the second applicant. 3. The first respondent and anyone acting through him prohibited from being present at mining claims registered in second applicant's name and from taking any assets. 4. Any act or conduct by first respondent whilst purporting to be director or shareholder declared null and void. 5. The second respondent (Registrar of Companies) ordered to accept documents from the first applicant for reconstituting the second applicant's board of directors. 6. The third respondent (Minister of Mines) ordered to accept payment of statutory fees for claims registered in second applicant's name. 7. First respondent to pay costs on a legal practitioner to client scale.
A person cannot be validly appointed as a director or shareholder of a company whilst that company is under judicial management. During judicial management, the judicial manager assumes the place of directors and management of the company pursuant to s306 of the (former) Companies Act, and exercises full management powers. Any CR14 form lodged purporting to appoint directors during the period of judicial management is null and void, and all acts performed by such purported directors are similarly null and void. An answering affidavit should not include new annexures without leave of court, as this would introduce new matters to which the respondent has no opportunity to respond.
The court observed that even if the first respondent had not committed acts of sabotage against the second applicant, this would not turn his appointment into a legal act - the illegality of the appointment during judicial management was the decisive factor. The court also commented that the Zimbabwe Investment Authority license, having been issued during the judicial management period, could not clothe illegal acts with legality. The court noted that both parties had laid before the court facts that had little bearing on the dispute at hand, which fell into the category of mere disputes rather than material disputes of fact. The court also mero motu raised the issue of propriety of attaching annexures to the answering affidavit, demonstrating the court's willingness to address procedural irregularities even when not raised by the parties.
This case establishes important principles regarding the protection of companies under judicial management from irregular appointments and interference. It confirms that during judicial management, the judicial manager assumes the place of directors and management, and no appointments of directors or shareholders can validly be made during this period. The judgment also clarifies procedural requirements regarding the attachment of annexures to answering affidavits without leave of court. It demonstrates the court's willingness to take a robust approach in dealing with applications and distinguishing between material disputes of fact and mere disputes. The case is significant for insolvency and company law practitioners dealing with companies emerging from judicial management and protecting their corporate governance structures.