National Social Security Authority v Capital Bank Corporation Limited and Renaissance Financial Holdings (Private) Limited

The first respondent (Capital Bank Corporation Limited) was incorporated as a merchant bank around 2001. Its performance declined around 2009 and it was placed under recuperative curatorship by the Governor of the Central Bank effective 2 June 2011. The applicant (NSSA) obtained clearance to rescue the bank and agreed with the second respondent (the holding company RFHL) to inject USD$24 million capital. The bank was removed from curatorship around March 2012. Despite the capital injection, the bank's performance did not improve. On 17 October 2013, following extraordinary shareholders' and Board meetings, a report showed the bank had a negative capital balance of USD$17,304,101 as at 31 August 2013. The shareholders passed a resolution by requisite majority that the bank be wound up. An initial application for voluntary liquidation was withdrawn and the present court application was filed by NSSA as a contributory seeking winding up by the court.

• Whether the application was properly brought under section 206 read with section 207 of the Companies Act
• Whether a contributory could present an application for winding up
• Whether a majority (as opposed to unanimous) shareholder resolution was sufficient to wind up the company
• Whether the first respondent was unable to pay its debts
• Whether it was just and equitable that the first respondent be wound up

The court granted the application and ordered: (1) Capital Bank Corporation Limited be provisionally wound up pending final liquidation or discharge of the order; (2) Mr John Mafungei Chikura be appointed Provisional Liquidator with powers under section 221(2)(a)-(h) of the Companies Act; (3) Any interested party may appear on 13 March 2019 to show cause why final liquidation should not be ordered and why costs should not be costs of liquidation.

A company may be wound up by court application under section 206 read with section 207 of the Companies Act where: (1) shareholders have passed a resolution by requisite majority (not necessarily unanimous) to wind up; (2) the company is unable to pay its debts as evidenced by sustained losses, negative capital and reserves, and liabilities exceeding assets; and (3) it is just and equitable to wind up the company to protect remaining assets and creditor interests where the company is no longer viable and its fortunes cannot be turned around. A contributory has standing to bring such application. Provisional liquidation should be granted pending final liquidation where these grounds are established.

The court noted, without making a definitive finding, the second respondent's allegation that the applicant had engaged in asset-stripping rather than turning around the fortunes of the first respondent. The court observed that regardless of whether this allegation was right or wrong, the practical result was that the bank had been asset-stripped and was no longer viable. This observation was not necessary to the decision but contextualizes the failed rescue attempt and the bank's current state.

This case confirms the proper procedure for winding up an insolvent company by court in Zimbabwe under sections 206 and 207 of the Companies Act. It clarifies that: (1) a contributory may bring an application (rather than petition) for winding up under section 206 read with section 207; (2) a majority shareholder resolution is sufficient to support winding up, unanimity is not required; (3) inability to pay debts is demonstrated through negative capital, sustained losses, and liabilities exceeding assets; (4) provisional liquidation is appropriate to protect remaining assets and creditor interests when a company is woefully insolvent and no longer viable. The case is significant in the context of failed financial institutions and the role of institutional investors like NSSA in seeking remedies when rescue attempts fail.