DWTL had a provisional liquidation order at the High Court withdrawn three weeks ago and it was highly anticipated that the company would once again go under judicial management.
It has however turned out that management at the textile firm would like to revive the company using own initiatives outside judicial management.
One of the ways through which management would like to revive the fortunes of the once prosperous textile firm is retrenching an unspecified number of workers.
DWTL currently employs 1 400 workers which is a significant drop on the 5 000 employees when the company was at its peak.
Apart from the retrenchment exercise, management at the textile firm is also expected to raise capital to resuscitate the flagging company.
Lawyers representing DWTL workers confirmed that the company would not be placed under judicial management.
“DWTL would not be placed under judicial management as management is now going to raise funds to revive the company,” said Claudious Nhemwa of C Nhemwa & Associates legal practitioners.
It is ironic that management at DWTL is expected to recapitalise the company when they failed to do so before they applied for an order of provisional liquidation.
DWTL was put under a judicial manager, Cecil Madondo, in May 2006 before this judicial management order was cancelled in May last year, but since then problems have been dogging the company.
DWTL workers applied for judicial management in 2006 arguing that there were serious corporate governance shortcomings and a severe liquidity crisis which was caused by financial impropriety.
These could only be solved by new management and the best way forward then was to place the textile company under a judicial manager who would assume the roles of the board of directors.
Upon his appointment as the judicial manager, Madondo prepared a report which highlighted the serious financial constraints at the company and the need to raise additional capital through a share issue.
The issuance of additional shares saw a new investor, Elgate Holdings, taking a 51% stake valued at US$5,4 million and in the process dilute the shareholding of Guscole Investment from 88,06% to a minority stake.
The US$5,4 million was to be paid within 90 days of the conclusion of the deal.
Problems started after the agreement of sale was concluded with interested parties accusing each other of not meeting the conditions of the contract to issue additional shares.
Elgate which is headed by Andrew Toendepi allegedly failed to pay the US$5,4 million for the shares it had acquired which partly led to the financial problems at the textile firm.
Toendepi argued that they had illegally sold the shares adding that they had brought operational goods whose value was supposed to have contributed to the US$5,4 million they were to pay for the stake.
The judicial manager on the other hand argued that Elgate had failed to fulfil the conditions of the agreement of sale signed on December 3 2007.
“By the time the company was removed from judicial management on May 20 last year, this was over 90 days (after the agreement of sale), and the US$5,4 million had not been deposited into the DWTL foreign currency account for the control of the new board of directors,” said Madondo.
Efforts to get confirmation as to how much Elgate Holdings, represented by Toendepi, invested into DWTL, were fruitless as they did not respond to questions sent by businessdigest.
Documents which have been separately submitted to the High Court by different stakeholders including the workers show that it is very difficult to tell if the US$5,4 million was paid.
In a petition to the High Court in May last year, DWTL workers tried to stop the cancellation of the judicial management order which had been requested by the new investor Elgate Holdings, represented by Toendepi.
This followed the resignation of Madondo a month earlier after workers at the Chegutu factory revolted against the judicial manager.
DWTL workers said they had approached the High Court to stop the cancellation of the judicial order as they had realised that the company was “sliding into a state of insolvency particularly after the judicial manager elected to relinquish his role on April 2008”.
It was also alleged in the petition that following the resignation of the judicial manager, the investor’s representative had assumed the role of chief executive of the company and instituted a restructuring exercise which impacted negatively on the viability of the company.
“DWTL has been consistently involved in business malpractices resulting in finished fabrics being held for speculative purposes after the judicial manager stood down,” said the workers in the petition. “In addition, substantial amounts of sales revenue generated by DWTL have been invested in grey markets and only to be bought back in foreign currency in DWTL as capital injection by the investor.”
Workers further alleged that Underhill Investments, a sister company to Elgate Holdings, was improperly used to transport raw materials at astronomical prices.