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MKM liquidation set to start

Tefo Tefo

MASERU — An attempt by MKM to delay its liquidation suffered a major setback this week after the High Court rejected the troubled company’s application for stay of execution.

MKM had approached the court seeking an order to stop the liquidation process pending its appeal against the May 18 ruling which said the company should be liquidated so its nearly 400 000 investors are paid their dues.

The company argued that because the Court of Appeal will only hear its case in October the Central Bank of Lesotho (CBL) must stop the liquidation process.

Should the liquidation process continue and the Court of Appeal overturns Acting Judge Justice Musi’s May judgment the MKM would suffer irreparable damage, the company’s lawyers argued.

But on Thursday Justice Musi, a respected judge hired to preside over the MKM matter after a number of local judges had recused themselves, rejected the application.

This was after the Central Bank of Lesotho (CBL)’s lawyers had opposed MKM’s application on grounds that its appeal to the Court of Appeal had no chance of success.

Justice Musi said he would only give the reasons for his decision later.

His judgment means MKM’s liquidation can now proceed in spite of its pending appeal.

A central bank official told the Sunday Express that Justice Musi’s decision has now cleared the way for the bank to start liquidating the beleaguered company.

“The liquidation process will start soon,” said the bank official who refused to be named because he was “uneasy about the fact the MKM case is yet to be heard by the Court of Appeal”.

That means Chavonnes Badenhorst from St Clair Cooper in Bloemfontein and Daniel Gerhardus Roberts from Webber Newdigate, who were appointed joint liquidators, can now start the liquidation process.

But experts warn that the process will not be easy.

A report by PricewaterhouseCoopers, a South African audit firm hired to investigate MKM’s operations, revealed that the company had a M300 million hole on its books and owed nearly 400 000 Basotho.

The huge number of people and money involved makes liquidation a difficult exercise that might take years to complete.

What makes the MKM’s liquidation even more complex is that, as the PricewaterhouseCoopers said, its records are in shambles.

That means more time will be spent on the verification of the nearly half a million claims that the liquidators are likely to receive from MKM’s creditors.

Disputes over some of the claims might spill over into the courts and further delay the liquidation.

More time will also be spent on tracing MKM investors scattered across the country.

But that is not the only difficulty the liquidators will have to deal with. The PricewaterhouseCoopers report said MKM could only account for M100 million of the M400 million it received from investors.

That means the liquidators will have to investigate how the missing M300 million was spent.

Such a process would require the liquidators to lift MKM’s corporate veil and analyse each transaction.

To do this they would need the cooperation of Simon Thebe-ea-Khale, the MKM’s managing director, and his fellow directors.

But with Thebe-ea-Khale and his cahoots already hostile to the liquidation and showing signs of stonewalling, the liquidators might have to fight bitter battles to get them to cooperate.

The biggest challenge, experts warn, will be on how to separate MKM’s assets from those of Thebe-ea-Khale.

So shambolic was the MKM’s corporate governance and accounting systems that by the time it was eventually shut down in November 2007 it had become almost impossible to distinguish between Thebe-ea-Khale’s assets and those of the company.

The PricewaterhouseCoopers’ report said more than 150 of MKM’s cars were registered in Thebe-ea-Khale’s name.

So were other assets that were bought by investors’ funds.

Thebe-ea-Khale might fight to keep those assets.

To force him to surrender them, the liquidators will have to convince the courts that those assets in his name indeed belong to MKM as a company.

The problem however, observers warn, is that this might be difficult to prove especially now that the company has been closed for four years and its records are not in order.

Equally difficult will be the process of getting the other directors to surrender MKM’s assets.

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