Voluntary suspension of Esor Limited – Update on Business Rescue Proceedings in respect of Esor Construction
(Incorporated in the Republic of South Africa)
(Registration number 1994/000732/06)
JSE code: ESR
Voluntary suspension of Esor Limited – Update on Business Rescue
Proceedings in respect of Esor Construction (Pty) Ltd
Shareholders are required to be updated on a quarterly basis on the status
of Esor Limited which shares were suspended on 17 August 2018.
Esor Limited’s major subsidiary Esor Construction (Pty) Ltd (“Esor
Construction” or “the Company”) was placed into business rescue on 13
August 2018 after a meeting of Directors of Esor Construction where it was
unanimously resolved that the company be voluntary placed into business
rescue as envisaged in section 129 of the Act.
1. Esor Construction
The Company’s main business is that of construction and the relevant
facts upon which the resolution was founded are:
1.1. Significant losses incurred on certain construction contracts by
the Company in the current and prior financial years;
1.2. According to the Company’s latest Management accounts, read with
its Annual Financial Statements for the year ended on 28 February
2018, the Company is indebted to its creditors in the aggregate
estimated amount of circa R130 million.
1.3. The current challenging economic environment within the
construction sector, particularly in respect of the inability of
the government and municipalities to execute and award contracts
and the significant delays experienced in receiving payments due
in respect of contract receivables relating to these entities;
1.4. The inability of the Company to obtain further short to medium
2. Commencement of Business Rescue Proceeding and important dates:
Board of directors of Esor Construction passed Friday, 10 August 2018
resolution for Business Rescue
File notice of resolution with CIPC Monday, 13 August 2018
Publish notice to affected parties Friday, 17 August 2018
Company nominates a business rescue Tuesday, 14 August 2018
CIPC confirms the appointment of BRP Tuesday, 14 August 2018
File notice to CIPC on BRP appointment Tuesday, 14 August 2018
Publish notice to affected parties of BRP Friday, 17 August 2018
First meeting of creditors Friday, 24 August 2018
First meeting of employees Friday, 24 August 2018
Special meeting of creditors Wednesday, 17 October 2018
Extension of date for publication of business Tuesday, 12 February 2019
2.1. Initial Actions during Business Rescue:
2.1. Very soon after their appointment the BRP’s engaged with the
Guarantors, the Shareholders and Absa Bank and focused their
attention on stabilising The Company and in consultation with
Affected Persons considering and identifying all possibilities to
restructure the affairs of The Company.
2.2. Thereafter, the BRPs have also engaged with the Shareholders, on the
requirements of resuscitating The Company or its business. The BRPs
have critically assessed all the options available in order to
restructure either The Company or its business.
2.3. The terms of a number of existing agreements were suspended by the
BRPs during Proceedings and this ultimately led to the terminations
of the follow projects:
2.3.1 Claremont Clinic,
2.3.2 AE du Toit Building at University Pretoria,
2.3.3 De Kraal Sports facility’ and
2.3.4 Lateral support work at Kriel
3. BRP Role, Duties and Powers
3.1. The BRP will assume responsibility for the affairs of the Company on
the date of his appointment by the Company.
3.2. As an independent party the BRP will facilitate the proceedings in
respect of the company and act in the utmost of good faith and conduct his
duties with the necessary diligence and care.
3.3. As an independent party the appointment as BRP to the Company is not a
contract of employment and should not be construed as such.
3.4. In terms of Section 140 of the Act the BRP has inter alia the
following duties and powers:
3.4.1. has full management control of the Company in substitution for its
boards and pre-existing management;
3.4.2. may delegate any power or function to a person who was part of the
board or pre-existing management of the Company;
3.4.3. may: 18.104.22.168. remove from office any person who forms part of the
pre-existing management of the Company; or
22.214.171.124. appoint a person as part of the management of the Company, whether
to fill a vacancy or not, subject to Section 140 (2); and
126.96.36.199. is responsible to: 188.8.131.52.1. develop a business rescue plan to be
considered by affected persons, in accordance with Part D of Chapter 6 of
the Act; and
184.108.40.206.2. implement any business rescue plan that has been adopted in
accordance with the Act.
3.5. In terms of Section 141 of the Act the BRP must investigate the
Company’s affairs, business, property and financial situation to assess
whether there is any reasonable prospect of the company being rescued as
contemplated in the Act. The BRP has an obligation to report any
contravention of any law, reckless trading, fraud, misappropriation of
assets or any criminal activity and is further obliged to rectify any
contravention including recovering misappropriated assets.
3.6. The BRP will have full executive power and authority to act for and on
behalf of the company to manage the affairs and business of the company and
act and transact as would be customary of a Board of Directors of the
3.7. The BRP will be responsible for all payments made from the bank
account of the company or a further banking account/s to be opened by the
BRP. The company banking accounts will be under the sole control of the
BRP, and payments to third parties, if not made by the BRP himself, will
only be made after the BRP has signed off presented payment schedules
together with supporting documents. The BRP has the right to delegate these
powers to any person was part of the Board of pre-existing Board of the
3.8. Should the BRP conclude at any time that the company cannot be rescued
or fail to have the business rescue plan as published by the BRP adopted by
creditors, then the BRP have the right to place the company in liquidation
and the directors will remain responsible for the affairs of the company.
4. Remuneration of BRP
4.1. Irrespective of the public interest score or whether the company is
classified as large company or not in terms the provisions of the Act and
its regulations the company agrees to pay the BRP with regard to the actual
time spent in attending to his duties the statutory rate of R2, 000.00
(exclusive of VAT) per hour; and
4.2 a reimbursement to the BRP for the actual cost of any disbursements
made and expense incurred on behalf of the company in the normal course of
what is reasonably expected in execution of the BRP’s functions during
5. Creditors meeting – 17 October 2018
The BRP’s convened a meeting of the company’s major creditors consisting of
the bank and guarantors, together with certain of the company’s largest
trade creditors. This meeting was held on 17 October 2018.
At the meeting of 17 October, the BRP’s presented to creditors a summary of
their work done to date. It was explained to the creditors present that,
pursuant to the calculations determining the outcome upon the immediate
liquidation of the company, only the company’s secured creditors and
employees will receive payment.
The BRP furthermore demonstrated that a BR plan in terms of which the
company’s book debts are collected in an orderly fashion will, at best, and
even in the event that a substantial portion of the debts due to the
company are collected, will provide an outcome of between 15 – 25 cents in
the Rand to creditors. The BRP’s furthermore indicated that the present
state of the company’s contracts means that there are still many
uncertainties as to what the final outcome in relation to such contracts
will be and how it will impact on claims against the company by its
It was also conveyed to the creditors present at the 17 October meeting
that the BRP’s are engaged in discussions with various parties with a view
to proposing alternative restructuring options and which will be, if
successful, be much more beneficial to creditors than the publication of
the BR plan which contain many uncertainties and no meaningful
restructuring of the company’s affairs.
The creditors present at the meeting represented the voting interest of
more than 60% of the voting interest of the entire body of creditors.
Upon conclusion and having discussed and debated the issues raised during
the meeting it was proposed by the creditors and unanimously agreed by all
creditors present, that the BRP’s will be afforded until 12 February 2019
to publish a BR plan.
6. Business Rescue Practitioner’s statement
The joint BRP’s are still of the view that there is a reasonable prospect
to develop and implement a business rescue plan for The Company that will
ensure that it, upon acceptance of the business rescue plan, will continue
in existence on a solvent basis, but this will require a reorganization of
the financial affairs of The Company and a consequential arrangement
between The Company and its Creditors regarding its liabilities.
7. Reinstatement of securities
The reinstatement of Esor shares is currently linked to the approval of the
business rescue plan that is due to be published and voted on by 12
14 November 2018
Vunani Corporate Finance
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