Lloyd Gumbo Senior Reporter
Harare businessman, Mr Eric Rosen, has been declared bankrupt after his company ran into debts as well as failing to settle statutory obligations.
Mr Rosen’s company, Eric Rosen (Pvt) Ltd, trading as Motor Action, filed for bankruptcy early this month as lawsuits and writs of execution threatened to ground the 30-year old business.
Mr Rosen and the company’s co-owner, his wife Elizabeth resolved to file for voluntary sequestration after suffering losses.
High Court Judge, Justice Loice Matanda-Moyo, granted Mr Rosen’s company a provisional liquidation on Wednesday.
In his founding affidavit, Mr Rosen attributes his company’s misfortune to dollarisation of the economy in 2009, bank loan to sponsor Motor Action Football Club’s participation at the CAF Championship and Confederation Cup as well as competition from Chinese cheaper imports of vehicle spare parts.
“Challenges began in the year 2009 when the Zimbabwean economy was dollarised,” said Mr Rosen.
“The applicant (Eric Rosen Pvt Ltd) needed funds to recapitalise, and it had no access to affordable means of financial credit. Consequently the applicant had to seek capital through local banking institutions, which offered rather expensive interest rates.
“The situation was further complicated by the fact that applicant started facing stiff competition from Chinese supplies which offered similar products (albeit inferior in quality) but cheaper in price which was an incentive to the general public.”
Mr Rosen said what also worsened the situation was a boom in the country’s informal sector which made trading even more difficult as the applicant was now competing with entities that had no overheads of taxes to pay.
He said Motor Action Football Club performed well, which saw them winning various league titles, a development that meant they were supposed to compete at the taxing continental competitions.
“As a result, the applicant in the year 2011 took on a $200 000 bank loan payable over a three-year-period from ZB Bank, which was necessary to sponsor the team’s journey to CAF Championship and CAF Confederation Cup in Madagascar.
“The applicant further took on an additional loans for capitalisation purposes of the applicant’s business through various short-term loan facilities,” said Mr Rosen.
The firm managed to repay some of the loans but failed to settle about $46 000 leading to ZB Bank suing the company for the debt plus interest.
Mr Rosen said his firm also failed to keep up to date with its statutory payments since 2012, owing Zimra over $80 000.
He said the two entities entered into a payment plan but his company found it difficult to fulfil its pledge because of the financial situation on the ground.
As a result, the revenue collector has refused to issue out the company with a tax clearance certificate, which has constrained the firm’s business operations.
The company has also failed to pay salaries to its employees and is also in arrears with NSSA.
“As is illustrated by the income statement, as at December 31, 2013 the applicant had made a net loss after tax of $167 623. The income statement further reflects that the applicant had an expenditure of $288 887 as compared to a total income flow of $121 264. As I averred above, the applicant’s income is just not sustainable to successfully run a business of its nature. It is self-evident that the applicant is operating at a loss,” said Mr Rosen.
They appointed Mrs Theresa Grimmel of Travade (Pvt) Ltd as the provisional liquidator.
Assistant master at the High Court, Ms Stellah Chapwanya in her report acknowledged that Mr Rosen’s company was loss-making.
“I therefore have no objection to the order sought and to the appointment of Mrs T Grimmel as provisional liquidator,” said Ms Chapwanya.
Justice Matanda-Moyo on Wednesday ordered that Mr Rosen’s company is provisional wound-up pending the grant of a final order as well as approving Mrs Grimmel as provisional liquidator.
“Any interested party may appear before the court sitting at Harare on Wednesday the 19th of November 2014, to show cause why a final order should not be made placing the applicant company in liquidation and ordering that the costs of these proceedings shall be costs of liquidation.
“This order shall be published once in the Government Gazette and once in The Herald newspaper in a Friday edition. Publication shall be in the short form annexed in this order,” said Justice Matanda-Moyo.