BCL and BCL investments’ to be wound up collectively
The Court of Appeal (CoA) has recently set aside a High Court ruling that dismissed BCL liquidator’s application to have the assets and liabilities of two companies pooled together and the affairs wound up as if they are one.
The two companies, BCL Investments and BCL Limited,will now be treated as a single entity.
Former liquidator, Nigel Dixon-Warren had previously unsuccessfully approached the High Court requesting the two pool their assets together in accordance with the Companies Act.
BCL Investments was formed in March 2013 for the purpose of driving BCL’s long-term strategy, christened the Polaris II strategy.
The initiative sought to diversify mining activities to include other base metals, diamonds and coal in the country and surrounding areas.
The investment arm itself, although registered as a separate entity, did not have its own management nor employees, with its board of directors entirely made of BCL employees.
Furthermore, the company did not have bank accounts, with its financial obligations settled by BCL.
CoA Judge J.A Brand said as it stands, BCL Investments did not have creditors, and have only one potential creditor being Norilsk Mauritius, whose claim depends on the outcome of its action for damages in the arbitration proceedings in London.
He noted that if the two companies were wound up separately, BCL’s creditors would derive no benefit from the assets of BCL Investments, for which these creditors have effectively paid.
Brandexplained that in it’s initial ruling High Court might have been persuaded by the companies’ financial statements.
These showed that expenses incurred by BCL on behalf of BCL investments – totaling P69 million – were not a loan but an investment in shares.
The statements were reportedly audited by Pricewaterhousecoopers, who Brand said had not been made a party to the proceedings nor had it been asked to explain its audit.
He ruled this is flawed, as the court was not asked to either revisit or invalidate the audit of the financial statements.
As a result, Brand ruled in favour of the liquidator and ordered that the winding-up of BCL Limited and BCL Investments should proceed as if they are one company.
He also ordered that the assets of the companies form a common pool, which shall be available to meet the claims of all unsecured creditors of the companies.
In essence, it means BCL and BCL Investments shall be taken to be jointly and severally liable for each debt payable and each claim against the other.