Black-owned technology group Choice Technologies has hit back at allegations that it is operating unlawfully and is still contesting what it calls a forced liquidation.
In a confidential memo circulated to staff by the company`s CEO, Semela Tseka, and leaked to ITWeb by a staff member, the company directly responds to accusations made against it by Structured Infrastructure and Solutions (SIS), a subsidiary of JSE-listed Square One Solutions Group.
Square One, through SIS, and Choice have been involved in a bitter battle over the last few months dealing with monies allegedly owed and Choice`s forced liquidation.
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, as well as the remainder of the interest, held by the Choice Group.
However, Square One has contested SIS was approached by Choice to thrash out a deal to save the ailing business. It also noted Square One`s involvement in an earlier liquidation of Ticor prompted Choice to request the help.
Replying to accusations
The attorney representing SIS in the matter, Kobus Swart, of Schwarz-North Inc Attorneys, spoke to ITWeb late last week, accusing Choice of operating unlawfully in certain provinces. However, the memo to staff explains the company is working in all branches under the direction of the liquidator.
The memo also calls the accusations by the SIS attorney "mischievous", explaining to staff that it is not the first set of allegations to have come from Swart`s office.
It goes on to explain that Choice has a High Court order, which allows it to trade at all nine of its branches across the country. "The High Court order covers all offices given that the regional offices are not separate companies." It is on the back of this court order that Choice still has more than 200 employees who continue to deliver services to various clients, including Vodacom and several government departments.
ITWeb retrieved the legal documentation, which confirms all offices have been granted permission to operate as they have in the past.
According to the court files, Choice was provisionally liquidated in September last year, and was placed under final liquidation on 9 December. Choice says it is contesting the final liquidation order.
Timing issues
Although the matter is being opposed, the final liquidation documents indicate Choice was not represented at the hearing held in December last year. The internal memo to staff confirms this, saying: "As per my internal memo, dated 12 December 2008, our legal team put forward an application for rescission on several grounds, one of which being that the matter was brought forward from 12 [December] to 9 December 2008, without adequate notification, as well as SIS not meeting a court order to deliver certain documents in time to Choice."
Swart, in an earlier interview, noted that other creditors had concerns around the situation with Choice. However, the memo says the company is not aware of any other complaints brought either to management or the liquidators.
According to the memo, the company has been in arbitration with Spoornet. The memo says: "Choice successfully tendered for a R900 million solution requested by Spoornet in 2001. After successfully delivering the pilot project, due to the change in the sponsors at Spoornet, as well as changes in their business requirements, a request was made for enhancements to the solution, the results of which were disputed. The matter has been in arbitration since 2005 and an outcome has not yet been reached. We are confident of success in this arbitration process."
Illogical move
In response to Swart`s statement that Choice is "dead in the water", the memo questions why, after a due diligence, Square One offered to buy Choice for R15 million in June. According to court documents, the offer comprised 15.3 million Square One shares for 100% of Choice. Today`s figures show Square One`s market capitalisation at R44.4 million, which means the Choice offer falls at just under half of the company`s market value.
Swart also alleges Choice approached another JSE-listed business for a lifeline, and accuses the listed company of performing work on Choice`s last remaining contract, before it has been finally awarded. This, he says, could allow Choice to build up an arsenal before the bidding begins.
In reply, Tseka`s memo says: "Due to non-disclosure agreements with various suitors interested to do a deal with the liquidator, which will result in Choice being taken out of liquidation, we are not able to comment in detail on his allegations, other than to state the fact that his statement in this regard is misleading and untrue."
Choice directors declined to comment on the matter, saying they would not like to be drawn into a media battle.
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