CREMPTON TRADING (PVT) LTD v MATEKENYA 2012 (2) ZLR 161 (H)

Flynote

Company — winding up — by the court — winding up at the petition of the company on grounds set out in s 206 of Companies Act [Chapter 24:03] — notice to employees and consultation — requirement to give such notice to and consult employees — failure by company to consult with its workers in terms of s 25A of Labour Act [Chapter 28:01] — such failure fatal to the application

Employment — Labour Act [Chapter 28:01] — s 2A(3) — effect on provisions of Companies Act [Chapter 24:03] — provisions of any section of latter act inconsistent with former to be overridden

Employment — workers — rights of — plan by employer to wind up company —requirement for employees to be consulted before High Court can accede to application for company to be wound up

Headnote

In terms of s 206 of the Companies Act [Chapter 24:03], the applicant, by a special resolution, resolved that it be wound up by the High Court and petitioned the court to do so. It was the applicant's case that its liabilities exceeded its assets and was unable to pay its debts. The High Court thereupon granted a provisional order of liquidation. However, on the return day of the provisional order, its confirmation was opposed by the respondent, who was the chairman of the works council. He argued that in terms of s 25A(5)(c), as read with subs (6), of the Labour Act [Chapter 28:01], the applicant was obliged to consult the employees works council about any proposal to relating plant closures. It was common cause that no such consultation had taken place. He refuted the allegation that the business had struggled just because of hyperinflation and dollarization; he said that the business was being mismanaged by its directors and that there was sufficient work for the employees to engage in, instead of subcontracting work to another company. He said that the company had good prospects of recovery if properly managed and thatthe appropriate remedy required was judicial management rather than winding up. He submitted that the proper course was for the applicant to be placed under judicial management rather than being wound up, which would involve the closure of the business.

Held, that winding up may either be voluntary or by the court. Voluntary winding up is carried out in terms of ss 242 and 243 of the Companies Act. This application came as an application for winding up by the court. The circumstances under which a company may be wound up by the court are listed under ss 206 and 207. A company undergoing voluntary winding up is required in terms of s 243 to give notice of the winding up, in particular to "the company's workers' committee or, where the company has no workers' committee, to the company's employees". There is no similar provision requiring the company to give notice of winding up or consultation where the winding up is by the court. The issue was, therefore, whether subss (5) and (6) of s 25A of the Labour Act, more particularly in the light of s 2A(3) of that Act (which provides the Labour Act shall prevail over any other enactment inconsistent with it), applied to the situation of winding up by the court.

Held, further, discharging the provisional order, that the effect of s 2A(3) of the Labour Act [Chapter 28:01] was to override the provisions of the Companies Act [Chapter 24:03] inconsistent with the provisions of the former Act. The general provisions of s 25A of the Labour Act must, therefore, apply to the situation. The intention of the legislature in enacting that section was clearly to ensure that workers are consulted about proposals relating to partial or total plant closure. As no such consultation had taken place, the applicant's failure to comply with the requirements of s 25A(5) and (6) of the Labour Act was fatal to the application.