WHEN IS A PROVISIONAL JUDICIAL MANAGEMENT ORDER GRANTED?

WHO HAS CUSTODY OF THE PROPERTY AND ASSETS?

WHAT ARE THE DUTIES OF THE PROVISIONAL JUDICIAL MANAGERS?

WHAT IS THE EXPECTED TIME PERIOD OF THE PROVISIONAL JUDICIAL MANAGEMENT?

WHAT ARE THE EFFECTS OF PROVISIONAL JUDICIAL MANAGEMENT FOR ME AS SHAREHOLDER?

The Court may, if it appears just and equitable, grant a judicial management order in respect of a company under Companies Act, 1973, (No 61 of 1973) Sec 427 when a company by reason of mismanagement or for any other cause is unable to pay its debts or is probably unable to meet its obligations; and has not become or is prevented from becoming a successful concern and there is a reasonable probability that, if it is placed under judicial management, it will be enabled to pay its debts or to meet its obligations and become a successful concern.

Where a company is wound up for financial reasons, it is sometimes the case that it could have been saved had it been managed well. Judicial Management was introduced to assist companies to overcome a temporary setback without going out of business. A judicial management order usually gives a company moratorium on its debts. Essentially, the Court replaces the director. Provisional judicial managers are appointed to assume control until the final judicial managers can be appointed. Application for judicial management may be made by the company itself, a creditor or a member. If the provisional judicial managers cannot return the company to solvency, then they may recommend to the Court that the company is wound up.

The goal of judicial management is therefore to assist a company to become a successful and viable concern.

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Upon granting of a provisional judicial management order all the property and assets of the company concerned shall be deemed to be in the custody of the provisional judicial managers as soon as they are appointed and have assumed office. The accounts of the companies are managed in such a way as to ensure financial independence of the companies on return date of the order. Steps are taken to improve liquidity within every enterprise. These could, for example, include giving certain creditors temporary preference over others and agreeing to compromise with creditors without the risk of committing an act of insolvency and thereby exposing the companies to liquidation.

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The provisional judicial   managers shall upon appointment:

1. assume the management of the company and recover and reduce into possession all assets of the company;

2. prepare and lay before the meetings convened under section 429(b)(i) a report containing:

• an account of the     general state of affairs of the company;

• a statement of the reasons why the company is unable to meet its obligations or has not become or is prevented from coming a successful concern;

• a statement of the assets and liabilities of the company;

• a complete list of creditors of the company (including contingent and prospective creditors) and of the amount and the nature of the claim of each creditor;

• particulars as to the sources or sources from which money has been or is to be raised for purposes of carrying on the business of the company; and

• the considered opinion of the provisional judicial managers as to the prospects of the company becoming a successful concern and of the removal of the facts or circumstances which prevent the company from becoming a successful concern.

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The return date for the provisional judicial management orders of abovementioned companies is the 2nd of March 2010. On this date the provisional judicial managers report back to the court with their findings.

On such day the Court may after consideration of-

• the opinion and wishes of creditors and members of the company;

• the report of the provisional judicial managers under section 430;

• the number of creditors who did not prove claims at the first meeting of creditors and the amounts and nature of their claims;

• the report of the Master; and

• the report of the Registrar,

grant a final management order if it appears to the Court that the company will, if placed under judicial management, be enabled to become a successful concern and that it is just and equitable that it be placed under judicial management, or may discharge the provisional order or make any order it may deem just.

If, at any stage prior to the 2nd March 2010, any the abovementioned companies becomes profitable, any interested and affected party, including the shareholders, may bring an application before the Court to lift the provisional order.

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The effect of the "syndication companies" provisional judicial management orders is that:

• management of these companies will become the responsibility of the provisional judicial managers appointed by the Master of the High Court on the 17th and 20th of November 2009.

• all liabilities, accounts, arrear payments and debts are settled as soon as possible according to legislative prescription applicable for companies under judicial management.

• the provisional judicial managers will manage these companies until the 2nd March 2010 when they will present to the Court a report on the performance of the business;

• on or prior to the 2nd March 2010 interested and affected parties may approach the Court and provide reasons why the order should be dismissed or confirmed as final. If the order is confirmed, then a final judicial management will be made by the Court.

The High Court was confident that judicial management offered the best possible prospect of preventing any of the companies' liquidations and of restoring the enterprises to financial health, all the while protecting the interest of the stakeholders.

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