Fengyue Glass Manufacturing, the Palapye-based entity was on Wednesday provisionally liquidated under an order by the high court in Lobatse leaving government with debts running into millions.
Justice Tshepo Motswagole granted the provisional liquidation order following submissions from the Botswana Development Corporation (BDC) lawyers. Fengyue Glass Manufacturing Company Botswana was incorporated on July 2007 as a joint venture vehicle between BDC and Shanghai Fengue listed as the second respondent in court papers. Making a case for liquidation Advocate Stais appearing with Advocate Pocock who was engaged by Armstrong Attorneys said the company is unable to pay its debts.
“The company has no sources of income. It is hopelessly insolvent and its liabilities far exceed its assets,” he said. He also said the glass company is years in arrears with its rental to the Ngwato Land Board and it is entirely reliant on the BDC to pay its monthly and other creditors.
Also Fengyue Glass Manufacturing Company Botswana has failed to submit PAYE, WHT and Income Tax returns and has many VAT returns outstanding. It is indebted to the Botswana Unified Revenue Services (BURS), but according to court papers the extent of the indebtedness is unknown. According to the petitioners’ heads of argument the full extent of its liabilities are unknown, because the company has no reliable financial records and has never been subjected to an annual financial audit. The value of work done to date in Palapye is estimated at P440 million, however due to Shanghai Febgyue’s failure to provide or retain proper financial records there is no definite quantification of value to the work completed.
The petitioners argue that it is just and equitable that the company should be wound up. Court papers presented before Motswagole touched on the history of the project described as “much-protracted”- affecting relationships at contract, shareholder, board and government levels. Contractual breaches, financial irregularities, substantial cost over-runs, work delays and suspensions and terminations of construction works have plagued the project. “There is an obvious distrust between the respective joint venture partners and their nominated directors and the BDC has lost confidence in the project,” reads the heads of argument, further stating that there is deadlock at board level.
The court papers reveal that BDC’s funding of the project is 75 percent but it has equity control of only 47 percent whilst Shanghai Fengyue has 53 percent equity control for its 25 percent contribution. At inception in 2007, it was envisaged that the project would cost P539 million. However it is now estimated that the project will require a further P765 million for completion-a staggering cost of P1.3 billion. According to the heads of argument, the winding up of the company will allow the BDC to enforce its preferential rights to obtain the use of the assets of the company or alternatively to sell the assets to defray the investment costs that were lost in the project.
Motswagole granted the order as prepared by the BDC and said parties should return on the 29th November 2013 to report back. The petition was not opposed. This publication was informed that Nigel Dixon Warren from KPMG has been appointed as the liquidator.