Black-owned IT company Choice Technologies is unlawfully keeping its doors open in at least certain provinces, following a final liquidation order issued against it in December, says a legal representative in the matter.
The company has been involved in a heated dispute with JSE-listed Square One Solutions Group subsidiary, Structured Infrastructure Solutions (SIS), for money allegedly owed to it. The dispute led to a provisional liquidation order in October, which Choice attempted to have dismissed.
In an interview with ITWeb this morning, the attorney representing SIS in the matter, Kobus Swart of Schwarz - North Inc Attorneys, explained the provisional order led to a final order. This means Choice has been under final liquidation since 9 December and should not be trading at all, he notes.
“Unless under the auspices of the liquidator,” he adds, explaining that only Choice's Pretoria office is operating with the liquidator's permission, as it is still servicing an outstanding contract. All its other operations should, by law, have shut their doors, he explains.
“If you call the KwaZulu-Natal office, they are denying they have been liquidated.” Other offices, such as the one in Bryanston, also remain operational.
Swart says the company has been using aversion tactics to keep its doors open, despite the fact that a set of liquidators has been appointed by the court and is being led by Corporate Liquidators.
ITWeb confirmed this morning that Corporate Liquidators is handling Choice's insolvency; however, the head of the case was unavailable to comment.
Help not hinder
Choice has maintained, since October, that SIS - through Square One - has attempted 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.
However, Swart reiterates it is “simply not true”. He explains that SIS was approached by Choice to thrash out a deal to save the ailing black empowerment business. He goes on to note that Square One's involvement in an earlier liquidation of Tecor prompted Choice to request the help.
Swart says a deal was approved by both company boards and was signed. “Choice reneged on that deal.”
He says the NEF, which stands to lose millions as a result of the liquidation, also tried to re-capitalise the business, “another solution which came to nothing”.
In on the action
A new storm now brews over the matter, with other creditors coming to the fore, with several new complaints against both Choice and the selected liquidators.
According to Swart, one of the claimants is Transnet, which is apparently owed R120 million to R150 million; a figure which Swart says leaves Choice dead in the water, alongside its other financial difficulties.
Swart says Square One's offered help allowed it access to Choice's financial situation, which he notes is particularly dire. “They are in a R100 million to R120 million deficit; that's without Transnet's claim.”
He adds that Transnet and several other creditors, which may or may not include Square One, are all considering a 417 enquiry, which, if found in the creditors' favour, could hold the directors of Choice responsible for any money outstanding.
Liberties?
Another problem, notes Swart, is that Choice has been desperately scrambling to find a way out of the situation through the work on the only remaining contract it has left. Swart notes that Choice approached another JSE-listed business, Convergenet Holdings, for a lifeline.
According to Swart, the lifeline will involve the last remaining contract, which Square One has also bid for. “However, it appears as though the liquidators are allowing Convergenet, through its subsidiary, Sizwe, to perform work on the contract before it has been finally awarded, which may allow them to build up an arsenal before the bidding begins.”
He says Square One has raised the issue with the liquidator.
In 2006, the NEF bought a 49% stake in Choice, that was held by Dimension Data, and the deal included a substantial cash injection, rumoured to have been as much as R10 million. At the time, Choice CEO Semela Tseka stated the company's 100% black-owned status would open doors for it in the lucrative public sector.
Tseka also declared the company was poised for organic expansion, and claimed it had various acquisition targets in its sights. However, these seemed to not have materialised, as the company spiralled into financial trouble.
ITWeb attempted to contact Choice Technologies for several weeks but the company's directors have avoided the numerous requests for comment.
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