Johannesburg, 01 Oct 2008
A storm is brewing between black-owned IT company Choice Technologies and JSE-listed Square One Solutions Group.
The latter has filed a provisional liquidation order against Choice, through subsidiary Structured Infrastructure Solutions (SiS), for money allegedly owed to it. However, Choice has slammed the order as an attempt by Square One to “eliminate an opposition company”.
While Choice is preparing to fight the provisional liquidation order, the company would not comment on the matter, saying it is an ongoing legal process. However, ITWeb is in possession of an internal memo, issued by CEO Semela Tseka, which outlines the company's position.
In the document, e-mailed to staff last Friday, Tseka states the matter arose from an attempt by Square One to take over a 49% stake in Choice, held by the National Empowerment Fund (NEF), as well as the remainder of the interest, held by the Choice Group. The initial deal was discussed in April/May this year, and received board approval from Choice.
“As part of the process, Square One Solutions Group purported to have access to the required funding to sustain the company and staff, among other things,” Tseka says in the memo.
He goes on to explain that media reports regarding Square One's involvement in the liquidation of a company called Tecor prompted the NEF to request Square One to provide guarantees for the purported funding it claimed to have for the transaction. “This was not forthcoming.”
Pressure on shareholders
The current liquidation order, according to sources close to Choice, is based on a disputed R2.8 million, which Square One claims is owed to it by Choice.
Tseka says Square One purchased 100% of SiS last year - a company that was often subcontracted by Choice to do cabling for customers.
“Square One Solutions then used SiS to put in a claim against Choice for work done on our behalf and monies which they claim were owed to them. The monies they claim are owed to them are in dispute by us, as the work by them was not completed.”
Tseka further charges that Square One used Choice's confidential financial information, gained during a due diligence, to put pressure on Choice shareholders to sell, or risk facing liquidation. Choice's refusal to pay the R2.8 million has subsequently resulted in SiS applying for a provisional liquidation order against the company.
The matter, says Tseka, is being opposed, with the High Court granting a provisional liquidation order in the interim, until it is heard on 11 November.
“It would seem apparent that this is an orchestrated attempt by Square One Solutions Group to eliminate an opposition company,” Tseka says.
Square One refused to comment this morning, saying the matter is sub judice, and that a meeting between itself and Choice is scheduled for this afternoon.
Meanwhile, Johan van Greunen, the lawyer representing network solutions company Tecor, says liquidators have been appointed in the case and the matter is now under investigation.
Tecor is defending the liquidation order against it, and has laid a charge of fraud and theft against Square One, stemming from an unconfirmed joint venture between the two companies. The joint venture was planned to secure a R400 million Telkom contract for the supply of a fibre-optic network to 2010 stadiums.
Tecor alleges the joint venture was never finalised, but Square One nonetheless acted as if the agreement had been concluded.
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