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…as more companies close shop

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THE number of companies seeking to close shop is set to rise as firms struggled to pay up their debts, an expert has said.

Business Reporter

Speaking at a workshop on challenges facing local firms last Friday, United States based technical expert Daniel Fitzpatrick said the number of companies that have petitioned to wind up has been trending upwards. In 2009, 11 firms petitioned while in 2010 there were 50 petitions and in 2011 a total of 73 petitions were held. In 2012 a total of 149 petitions were handled.

Fitzpatrick said petitions that were converted to judicial management had also spiked during the year under review.

“The cases would probably be more in 2013,” he said.

Under local laws, winding up procedures involve the appointment of a liquidator, who gathers and sells assets of the company, using the resulting funds to pay creditors and, if possible, shareholders in accordance with statutorily based priorities.

Fitzpatrick said the economy has high non-performing loans and many companies were facing economic distress as products and production processes had become obsolete.

Zimbabwe’s economy has been underperforming since the start of the year, with capacity utilisation in the manufacturing sector dropping to 39% this year from 44% last year mainly due to funding constraints. Erstwhile heavyweights that have been placed under judicial management include Cairns Holdings and David Whitehead textiles.

He however, commended the country for its good debt collection process.

“Zimbabwe has not been doing well on the World Bank Doing business, but it has good debt collection processes in the region,” he said.

Fitzpatrick said local companies take too long to file for judicial management, adding banks were reluctant to lend to companies under judicial management.
Companies face difficulties in suspending labour contracts for workers and there were no clear and binding deadlines for the judicial management, Fitzpatrick added.

Speaking at the same workshop, Cairns Holdings judicial manager Reggie Saruchera said there was need to review some policies to ensure that companies under judicial management could be bailed out.

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