Regiments Capital to be liquidated

Regiments Capital, a company fingered in the capture of the South African state, will be liquidated.

This follows a successful application by the South African Revenue Service (Sars) and its liquidators to the Supreme Court of Appeal against an earlier order setting aside the liquidation.

The banking and advisory firm was founded in 2004 and provided services to government, state-owned enterprises and corporates. It owed Sars R280 million, excluding understatement penalties, statutory penalties and interest.

This related to an audit for income tax for 2014 to 2019 as well as value-added tax  (Vat) for March 2013 to February 2016.

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Restraint order

The case dates back to November 2019 when the National Director of Public Prosecutions obtained a provisional restraint order against Regiments’s assets.

When the restraint order was discharged it led to an application for an order before the high court to stay the winding-up of the company and allow it to participate in an unbundling transaction in respect of shares it held in Capitec Bank. The application was brought by the owners and related parties.

The high court found that on the evidence before it the firm had total assets of R935 million and that its assets exceeded its liabilities by more than R260 million.

The winding-up application was therefore set aside.

During the high court proceedings Sars accepted that Regiments had cash worth R36 million and that it held shares worth R350 million in Capitec Bank. However, it did not accept that its interest in two other companies – Kgoro Consortium and Little River Trading – was worth R545 million.

At the time, the high court found that “on a balance of probabilities” Regiments was “asset rich but cash poor” and therefore “only commercially insolvent”.

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Appeal

Sars appealed the high court’s decision to set aside the winding up application, with several interested parties (totalling 31 respondents) cited in its SCA application.

The SCA found the high court had “misdirected itself on the facts and the law” and that its decision “was based on incorrect facts and wrong principles of law”.

It found that the firm’s liabilities far exceeded the value of its assets and that it was factually insolvent.

It was undisputed that Regiments Capital did not trade and that there was no prospect that it might do so in future, the judge noted in his decision.

“In these circumstances, I fail to see how a finding that Regiments was commercially solvent at the time could have justified the order of the court a quo [the court in which the matter was first heard] … ” the judge said.

The SCA found that Regiments was both “factually and commercially” insolvent and that there was no basis for finding that the continuation of its winding up was “unnecessary or undesirable”.

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Protecting the tax base

Sars Commissioner Edward Kieswetter said he was pleased with the SCA decision.

Sars said in a statement the effect of the decision now places the winding up of the company, including the unbundling of its investments, in the liquidators’ hands and under the ultimate supervision of the Master of the High Court.

 “These proceedings demonstrate that Sars is attuned to the nuances of corporate structuring and has the skills and the resolve to intervene and act firmly to protect the fiscus and act purposively in the overall interest of the tax base,” said Sars in its statement.

“The outcome of this complex and highly contested appeal reflects my undertaking, given at the start of my term, to act decisively and judiciously to combat instances of state capture and to regain public trust and confidence,” Kieswetter said.

This article originally appeared on Moneyweb and was republished with permission.
Read the original article here.