Judicial Managers Cash In On Distressed Firms

More than 60 local firms are under judicial management  exposing the failure by judicial managers tasked with reviving the distressed  companies to come up with credible resuscitation plans.

Judicial managers and liquidators of the troubled firms are charging high management fees thereby prolonging the revival strategies in order to cash in on the remaining financial reserves of the ailing companies.

The past five years have seen locally troubled firms being exposed to huge budgets on paying rescue strategist as most of the judicial managers who instead of reviving the firms continue to prejudice them of their hard earnings, with many of the struggling companies resorting to the high court in search of refuge from marauding creditors under the guise of judicial management.

With statistics showing more than 60 firms in the manufacturing, textiles, banking, agriculture, mining, construction, tourism among others having been placed under judicial management, concern is being raised over the prolonged tenure of the management contracts or revival plans by the liquidators, curators and judicial managers.

Graduate School of Management Director, Dr Nyasha Kaseke said liquidators and judicial managers are taking a long time to rescue the firms with a view of gaining more funds instead of focusing towards the continued operations of the troubled or distressed companies.

The ZBC news has established that judicial managers and liquidators who take over management of firms under liquidation, charge either a percentage of the portfolio or asset value of the company which is negotiated up to about 5.5 percent.

They can also charge an hourly commission which is more like a moving target and they can earn more than the shareholders and creditors  funds, a move which an economist, Dr Albert Makochekanwa says will really not translate towards the turnaround or revival of a troubled firm in the short to long term.

According to data obtained from the master of the high court, a total of six companies were placed under judicial management, while 13 were liquidated during the first quarter of this year, but with the slow pace at which judicial  managers are taking their time to formulate credible strategies while cashing in on the remaining   low financial reserves, it is the shareholder, worker and creditors who are being exposed to more hardships  as they have to wait for a longer  period  for the fate of their company, says Dr Kaseke.

The role of judicial managers in rescuing troubled firms is therefore under spotlight as Zimbabwe seeks to turnaround the economy with calls for the government to regulate operations of those tasked to revive ailing firms in order to restore credibility and transparency as a means of accelerating the reopening of firms  for the benefit  of shareholders, workers and the economy.

ZBC