Introduction
In previous articles I have explained that corporate rescue is regulated by the Insolvency Act (Chapter 6:07) of 2018, hereinafter (“the Act”). According to the Act corporate rescue means the proceedings to facilitate the rehabilitation of a company that is financially distressed.
I have been requested to write on the legal right or capacity or locus standi of employees or trade unions in making an application to the High Court to place a company under corporate rescue proceedings. My article is based on the Insolvency Act, two Supreme Court of Zimbabwe decided cases, being Metallon Gold Zimbabwe (Private) Limited and Others versus Shatirwa Investments Investments (Private) Limited and Others, Judgment No. SC 107/21, Civil Appeal NO. SC255/20 (or “the Metallon case”) and Redwing Mining Company (Private) Limited versus Associated Mine Workers Union of Zimbabwe and Others, Judgment No. SC96/22, Civil Appeal No. SC327/20 (or “the Redwing case”).
Brief factual background of the cases
In the Metallon case the Associated Mine Workers Union of Zimbabwe (“AMWUZ” or “the union”) was a one of the four respondents in the Supreme Court case, including Shatirwa Investments (Private) Limited. The matter was an appeal against the decision of the High Court (“the court a quo”) which placed appellants Metallon, Goldfields of Shamva (Private) Limited and Goldfields of Mazowe (Private) Limited under corporate rescue in terms of section 124(1)(a) of the Insolvency Act.
Shatirwa Investments and AMWUZ had sought and obtained an order in the High Court to have the above three appellant companies placed under corporate rescue proceedings on the basis of financial distress. More relevant to this article, AMWUZ, in making its application, averred that it was an “affected person” in terms of the Act, in that it was a registered trade union in the (mining) industry. The union further stated that it also derived locus standi (legal right or capacity to act at law for purposes of the application) from its status as a creditor of some of the appellants.
In the Redwing case in the Supreme Court AMWUZ was one of the three respondents. The matter was an appeal against the whole judgment of the High Court placing Redwing under supervision and corporate rescue proceedings in terms of section124 of the Insolvency Act.
In the High Court AMWUZ had applied for the placement of Redwing under supervision and corporate rescue arguing that the union was an “affected person” as defined in the Act as it represents the rights and interests of workers in the mining and related industries. It was also an “affected person” in that it was a creditor as Redwing owed it union fees for its members. It therefore had locus standi to bring the application.
Decisions of the Supreme Court
In the Metallon case the Supreme Court bench made up of Malaba CJ, Bhunu JA & Chiweshe AJA, on locus standi, determined that AMWUZ or the union had no locus standi (legal capacity) to make the application as it did not meet the definition of “affected persons” in terms of section 121 of the Act.
In the Redwing case the Supreme Court bench made up of Bhunu JA, Chiweshe JA and Chitakunye JA found that AMWUZ or the trade union did not have locus standi to make the application.
Reasoning of the Court
In the Metallon case the Court made the following findings:
- According to section 124(1) unless a company has adopted a resolution (for voluntary corporate rescue proceedings) contemplated in section 122, an affected person may apply to a court at any time for an order placing the company under supervision and commencing corporate rescue proceedings.
- The statute is specific in relation to the applicant who is entitled to make an application for corporate rescue. The statute is specific to curb the abuse of the process by parties who may not have a substantial interest in the rehabilitation of a company as well as as parties who may only be interested in their personal financial gain and not the rehabilitation of the company.
- In terms of the Insolvency Act, there is no ambiguity as to whom an affected person is. It is either a shareholder, a creditor of the company, a registered trade union representing the employees of the company or the employees of the company who are not represented by a trade union.
- AMWUZ or the trade union, though a registered trade union in the mining industry, it cannot be held to be an affected person in terms of section 121(1)(a)(ii) of the Insolvency Act. The Insolvency Act does not provide for a registered trade union in the industry but specifically provides for a “registered trade union representing the employees of the company”.
In the Redwing matter the Supreme Court made the following findings:
- The Court made reference to section 121(1)(a) as it relates to affected person, the same position adopted in the Metallon case.
- The definition of affected person has the effect of excluding those who do not meet such criteria such that a person or entity with a general interest, not stated above, would not qualify to bring such an application. To have locus standi one must meet the criteria set – shareholder or creditor of the company; a registered trade union representing employees of the company, thus disqualifying any other trade union or representative body that may be in the industry but not representing employees of the company. The Court made reference to the Metallon case.
- It is clear that section 121(1)(a)(ii) requires that the trade union must be one that represents employees of the company that is subject of the proceedings. It cannot be a trade union representing workers in the industry in general.
Conclusion
To qualify as an affected person for purposes of making an application to place a company under corporate rescue proceedings a registered trade union has to demonstrate that it represents the employees of the company concerned and not the industry in general.
Disclaimer
This simplified article is for general information purposes only and does not constitute the writer’s professional advice.
Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), Hons B.Compt (UNISA), CA(Z), MBA (EBS, Heriot- Watt, UK) is a practising commercial lawyer and conveyancer, chartered accountant, corporate rescue practitioner, registered tax accountant, consultant in deal structuring and business valuer. He is also a director with Investacare International (Private) Limited. He writes in his personal capacity. He can be contacted on +263 772 246 900 or gohofisi@gmail.com
