STEINHOFF International’s woes deepened on Friday after the Western Cape High Court ruled in favour of Trevo Capital and declared that the troubled retailer had violated the Companies Act in 2019, an outcome that could affect the payouts and settlements to other claimants.
This comes after Trevo Capital, a Mauritius-based company, brought an application in the Western Cape High Court seeking a declaratory order on February 16 that, among other things, the Steinhoff International Holdings Proprietary Limited (SIHPL) guarantee and a contingent payment undertaking (CPU) between SIHPL and global loan agency services, dated August 12, 2019 (SIHPL CPU), did not comply with section 45 of the Companies Act, which outlines requirements that must be met for a board to extend financial assistance.
Trevo in its grievances against Steinhoff in the court papers had said it entered into a forward sale agreement involving Steinhoff shares on November 23, 2015, having relied on the 2015 financial statements.
However, subsequently after the accounting irregularities came to light, these had proved to be misrepresentation on the part of the retailer, by trading recklessly, with gross negligence and by defrauding the public.
Trevo instituted a claim of around R2.1 billion against Steinhoff as a result of losses suffered from the fall in the share price.
Trevo had argued that the necessary test for solvency and liquidity was not undertaken by the Steinhoff board before it signed off on guarantees for financial creditors both before the fraud at Steinhoff was revealed and then as part of the debt restructuring in 2019.
Hamilton BV and Hamilton 2 BV also joined the application as the second and third applicants, respectively.
Steinhoff alerted its shareholders on Friday that “today the court released its judgment granting an order declaring the SIHPL contingent payment undertaking and SIHPL’s board resolution authorising entry into the SIHPL CPU are void in terms of section 45 of the South African Companies Act”.
Steinhoff said it was considering the implications of the judgment, including for SIHPL’s proposed section 155 proposal, and would provide an update in due course.
Steinhoff International has faced a number of claims in South Africa and in Europe following its admission to accounting irregularities in December 2017, which led to a more than 95 percent decline in its share price and losing more than R200 billion in market capitalisation.
However, on Thursday Steinhoff claimed a rare victory on the back of a Dutch court rejection of Hamilton BV and Hamilton 2 BV’s appeal in its proposed global litigation settlement and Dutch suspension of payments (Dutch SoP) proceedings.
Hamilton lodged an appeal as it was previously announced on May 28 against the decision of the Amsterdam District Court concerning the appointment of a committee of representation and measures regarding the list of claims as referred to in Article 259 of the Dutch Bankruptcy Act.
BUSINESS REPORT