A former unit of London Stock Exchange-listed construction firm, Costain, which was taken over by a local management consortium, has been accused of an ‘incestuous’ relationship with its sister company after management failed to separate the two entities’ books, the High Court heard on Wednesday.
The former Costain Zimbabwe, renamed Ceezed Construction, was placed under provisional judicial management in October 2014 – just over three years after the localisation of ownership – due to financial challenges resulting in the firm failing to meet its obligations when they fell due and some of its assets being seized.
The two companies, Ceezed and CZL Incorporated, have been operating as one with the former’s provisional judicial manager, Wesley Sibanda of Welsa International Chartered Accountants calling for the placement of CZL under administration to enable him to collect $19 million the firms are owed in order to pay creditors.
The companies’ assets were valued at $20 million while liabilities, including loans, stood at $10 million.
“There is an advanced corporate incest and the two companies have been enjoying borrowing loans worth over $6 million which were not separated and it’s now complicated to distribute their assets and liabilities,” Sibanda said.
“When the name changed, the contracts should have been transferred to Ceezed and that is where the problem is. Instead of Ceezed at the time of applying for judicial management, the business was recorded in the books of CZL.”
Sibanda said he found it difficult to collect debts owed to Ceezed because of its links to CZL and called for its placement under administration to facilitate recovery of the $19 million owed by debtors.
“I have been in contact with all the debtors and they don’t know who to pay – whether Ceezed or CZL,” he said.
He said an application had been made to the High Court to place CZL under judicial management with the order expected by February at which time Sibanda said he would be in a position to start paying creditors.
He said both companies, with a net worth position of $9 million were not insolvent and could be turned around under proper management.
During a meeting on Wednesday, creditors proved further claims worth over $300,000 while the firm was placed under final judicial management.
Costain changed its name to Ceezed in 2011 after a successful takeover of the company by a management consortium led by group executive chairman Tendai Chimuriwo. The Chimuriwo-led management consortium increased its stake in the company from 15 percent to 100 percent in the takeover, which was approved by the indigenisation ministry and hailed as a major step towards indigenisation and empowerment programme in the country.
Costain Africa (Private) Limited remains invested in Zimbabwe in the property sector, where it owns various buildings and prime property sites in major cities. The company won the tender to build the new hotel for Nssa in Beitbridge for $20 million.