People disqualified from insolvency practice

Introduction

I refer to my previous articles on corporate rescue in Zimbabwe. As explained in those articles corporate rescue in Zimbabwe is known by other terms such as “business rescue” or in the past as “judicial management”.

The proceedings are regulated by the Insolvency Act (Chapter 6:07) of 2018, hereinafter called “the Act”. According to the Act corporate rescue proceedings are meant to facilitate the rehabilitation of a company that is financially distressed.

Section 121 of the Act provides for:

Temporary supervision of the company and management of its affairs, business and property, and

Temporary moratorium (relief) on the rights of claimants against the company or in respect of property in its possession, and,

The development and presentation, if approved, of a plan to rescue the company by restructuring its affairs, business, property, debt and other liabilities and equity.

People qualified or disqualified from corporate rescue practice

According to section 131(1) of the Act a person may be appointed as the corporate rescue practitioner of a company only if the person:

(a) is not disqualified to be appointed liquidator in terms of section 74;

(b) has been registered and licensed as an insolvency practitioner in terms of the Estate Administrators Act (Chapter 27:20);

(c) is not disqualified from acting as a director of the company in terms of the Companies (and Other Business Entities) Act (Chapter 24:31) (the “COBE” Act).

(d) does not have any other relationship with the company such as would lead a reasonable and informed third party to conclude that the integrity, impartiality or objectivity of that person is compromised by that relationship;

(e) is not an associate of a person who has a relationship contemplated in paragraph (d);

(f) has provided security in an amount and on terms and conditions that the Master considers necessary to secure the interests of the company) and any affected persons.

The above section regulates who can or cannot be a corporate rescue practitioner.

People disqualified from being liquidator of a company

Section 74 of the Act disqualified certain people from being liquidators. According to the section a person is disqualified from being elected or appointed as a liquidator if he or she:

(a) is not registered in terms of the Estate Administrators Act I Chapter 27:20); (b) is an insolvent;

(b) does not reside or have a place of business in Zimbabwe;

(c) is the spouse of the debtor in question;

(d) is related or deemed to be related to the debtor or to his or her spouse in the first, second or third degree of consanguinity relationship;

(e) is a minor or any other person under legal disability;

(f) is declared under section 79 to be disqualified;

(g) is not a natural person;

(h) has been convicted, whether in Zimbabwe or elsewhere, of an offence involving dishonesty and if he or she was sentenced to imprisonment without the option of a fine;

(i) was, at any time, a party to an agreement or arrangement with any debtor or creditor whereby he or she undertook that he or she would, when performing the functions of a liquidator, grant or attempt to grant to, or obtain or attempt to obtain for any debtor or creditor any benefit not provided for by law;

(j) has by means of any misrepresentation or any reward or offer of any reward, whether direct or indirect, induced or attempted to induce any person to nominate him or her as liquidator, to vote for him or her as liquidator or to effect or assist in effecting his or her election as liquidator of any insolvent estate;

(k) at any time during a period of five years immediately preceding the date of liquidation acted as the bookkeeper, accountant or auditor of the debtor;

(l) has a proven interest that is opposed to the general interest of the creditors of the in solvent estate.

Conclusion

The Insolvency Act determines who can be a corporate rescue practitioner or liquidator and who is disqualified.

-herald