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Phumelela ‘Liquidation’ Threat Questioned

SP reader suggests threats be investigated

“If Phumelela were faced with possible liquidation, the ripple effect throughout the horse racing value chain would be catastrophic and irreversible, threatening the livelihood of thousands of people and stakeholder dependant on the sport”

I have requested a response from the JSE as to how this kind of communication is acceptable when a company is threatening liquidation, given the fact that:

1) The company recently issued a trading update confirming that they are in breach of their loan covenants, writes Brendon in the Sporting Post Mailbag.

2) They are in a closed period and their auditors are probably finalising their year -end audit and by all accounts, the recent updates from the company suggest solvency and liquidity challenges have adversely affected them; and

3) The company is not suggesting ‘Business Rescue’ but ‘Liquidation’ in their communication. I’m not condoning the use of either.

Surely, the threat of ‘liquidation’  on any SENS announcement is tantamount to the words ‘bomb, explosives and hijacking’  in any airport or aircraft?

Surely such treats should not be tolerated and should be investigated?

If this company does in fact go into business rescue or liquidation, what responsibility would the Directors, Sponsoring Broker and the JSE take for such a veiled statement being issued?

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4 comments on “Phumelela ‘Liquidation’ Threat Questioned

  1. Ian Jayes says:

    What indeed?

  2. Jim says:

    i think the 3 % is the issue here .without it liquidation is a real possibility so one can only assume this so called threat is aimed at the gambling board who are still witholding

  3. Graham says:

    Mabe
    Just
    Mabe
    What the sport needs to get it working again

  4. Ivan says:

    It is all about the insolvency and liquidity test.

    Because the Board has made reference to PGL being liquidated shows that they are deeply concerned about its viability.

    If Phumelela does not pass muster regarding the insolvency and liquidity test, they have no option. They must liquidate or they will end up personally responsible.

    I took this off the net. It explains the test.

    WHAT IS THE INSOLVENCY AND LIQUIDITY TEST

    For any purpose of the Companies Act, a Company satisfies the solvency and liquidity test at a particular time if, considering all reasonably foreseeable financial circumstances of the Company at that time:

    (a)  the assets of the Company or, if the Company is a member of a group of Companies, the aggregate assets of the Company, as fairly valued, equal or exceed the liabilities of the Company or, if the Company is a member of a group of Companies, the aggregate liabilities of the Company, as fairly valued; and

    (b)  it appears that the Company will be able to pay its debts as they become due in the ordinary course of business for a period of 12 months after the date on which the test is considered, or in the case of a distribution, 12 months following that distribution.

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