By Favour Matenga
Five Zimbabwean companies have been successfully turned around despite the ongoing economic challenges. This was said by a local Chartered Accounts firm, Grant Thornton in a statement this week.
“We are excited that the following companies came out of judicial management in January and February 2020 after successful turnaround rescue proceedings,” read part of the statement.
The five companies which were guided out of judicial management by Grant Thornton include two CFI Holdings Limited subsidiaries, Agrifoods and Crest Breeders, Zimbabwe Hosiery Company, Barco Chemicals and Phoenix Consolidated Industries Limited.
Grant Thornton, which has successfully assisted other companies such as Blue Ribbon Industries and Cairns Foods Limited out of judicial management, blamed the management teams of troubled companies for their (companies’) failure to come out of the woods due to the delays in commencing the corporate rescue process.
“In most cases, companies delay the commencement of corporate rescue proceedings until it’s too late, thereby making it difficult to revive the company’s operations to a profitable and sustainable level. Insolvent companies are usually forced into commencing corporate rescue proceedings by creditors intending to execute against the assets of the company.
At that stage, the insolvent company’s assets will have been stripped, employees’ morale dampened, suppliers unwilling to extend credit facilities and some operations of the company mothballed. Consequently, delayed corporate rescue proceedings have implications on the time and cost needed to successfully rescue an insolvent company,” the firm said.
The Chartered Accounts firm, which is led by Reggie Saruchera, indicated that the new insolvency legislation of 2018 placed the responsibility for the early commencement of corporate rescue operations on company directors.
“In the new insolvency law, the directors of a company will be held accountable for causing or allowing a company to incur debt when they know or have reasonable suspicion that the company will not be able to repay the debt. This accountability is meant to motivate directors to seek early intervention in the form of corporate rescue,” the company explained.
Turning to judicial management success factors, Grant Thornton advised focus on the short-term and long-term.
“We believe that companies entering rescue plan proceedings have always needed to keep an eye on two horizons; the long term goals and short term challenges. In today’s rapidly changing trading environment, where uncertainty dominates, that twin focus needs to be sharper than ever,” the firm advised.
Meanwhile, Grant Thornton which was commissioned by Government to handle the process of turning around the fortunes of the national airline, Air Zimbabwe issued a reconstruction notice to the parastatal’s creditors in which it highlighted that it had solicited for a strategic partner or investor but none of the bids submitted had succeeded. The firm advised Government to deal with the airline’s legacy debts.
