An urgent application for Valor IT's liquidation will be filed in the North Gauteng High Court today, after it ran out of options to get out of paying a $250 000 claim.
The liquidation application could also bring an end to a long-running legal battle between the company and the Department of Trade and Industry, over a settlement Valor IT claims it reached with the department regarding an aborted R153 million contract.
Software company Blue Turtle sued Valor IT for $250 000 - or R1.76 million - after Valor IT circumvented it in a profit-sharing deal related to software for an enterprise content management (ECM) system installation at the now-defunct Companies and Intellectual Property Registration Office (Cipro).
Valor IT's R153 million contract, to install the ECM system, was canned last year by trade and industry minister Rob Davies after irregularities were uncovered during the awarding of the contract.
Valor IT fought Davies' cancellation of the deal and repeatedly claimed to have reached a R28 million settlement with the department. Last month, Valor IT said it would appeal a court ruling that found no agreement had been reached.
Urgent application
However, the company's ongoing court wrangles may come to a sudden end if Blue Turtle's application to have it liquidated is successful.
Blue Turtle's urgent application, which is set to be lodged today, is for a total of R2.555 million. The amount comprises the original order of $250 000, costs and interest at 15.5%.
In January, judge RD Claassen ruled that Valor IT must pay up after cutting Blue Turtle out of the government deal to provide software for the Cipro ECM implementation, going straight to US-based company Vignette instead.
Blue Turtle's application for liquidation comes after Valor IT failed to fork out the due amount, despite having run out of courts at which to lodge an appeal. Blue Turtle CEO Geoff van der Bosch says Valor IT's bid to have Claassen's ruling overturned in the Bloemfontein Supreme Court of Appeals recently failed.
Valor IT was due to pay the amount last Wednesday, but failed to do so, instead offering to settle, says Van der Bosch. This bid was turned down and the sheriff of the court unsuccessfully attempted, last Thursday, to attach Valor IT's assets.
Attorney Gert van der Merwe, of Van der Merwe and Associates, says Valor IT has not paid in terms of the court order and ignored two letters of demand before offering to settle last week. He says the urgent liquidation application will be filed in the Pretoria, or North Gauteng, High Court.
“The threats are over now... they still didn't pay.”
No chance
However, Valor IT chairman Josias Molele argues that Blue Turtle will not succeed, because he has filed an application under the new Companies Act to implement a business rescue plan. “It's [the liquidation] not going to happen.”
The Companies Act came into effect in May. It makes provision for proceedings to facilitate the rehabilitation of a company that is financially distressed.
In terms of the Act, companies can apply for the temporary suspension of activities, as well as a temporary moratorium on the rights of claimants against the company relating to its assets. It also allows for a rescue plan to be developed and implemented.
The rescue plan will either involve restructuring the company's affairs to “maximise the likelihood of the company continuing in existence on a solvent basis” or for a “better return for the company's creditors or shareholders than would result from the immediate liquidation of the company”.
However, a company that has applied for a rescue plan can still be liquidated if a creditor has applied for an order to wind it up if “it is otherwise just and equitable for the company to be wound up”.
Molele says the clause gives a distressed business the opportunity to file for protection if it can show it has deals in the pipeline that will prevent it from going under. He argues he needs to protect stakeholders, such as about 25 staff members.
Valor IT offered to settle the matter and pay Blue Turtle R1.5 million, an option the software company turned down, says Molele. “If they want to go and waste their money, they can do that.”
Misrepresentation
The software company claimed Valor IT had breached a contract based on a deal that Blue Turtle would assist the company in implementing the tender.
The agreement between the two companies was that Blue Turtle would buy software from Vignette for $1 million, and the software would then be sold to Cipro for $1.4 million, with the profit being split between the two companies.
However, the judgment found Valor IT cut Blue Turtle out of the deal, and went straight to Vignette, saving itself $100 000. Valor IT argued Blue Turtle misrepresented itself as being a Vignette distributor, when it is only a reseller.
Cipro had already paid Valor IT about R95 million by the time Davies put an end to work on the ECM system. The implementation was meant to enhance Cipro's infrastructure to cut down on fraud.
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