The Sunday Mail
The unfortunate reality is that some Judicial Managers put their personal interests before the interests of the company and make decisions that harm the organisation they are meant to help.
When you are sick you visit a medical doctor who establishes the nature of your illness and provides a remedy. The same applies to a struggling company. In times of financial sickness some companies engage Judicial Managers. Judicial Management is a vehicle created under Section 427 – 440 of the Companies Act of 1973 which affords a struggling company an opportunity to overcome its financial problems.
The question is whether or not Judicial Managers are solving these financial problems or are actually making matters worse?
Imagine a doctor willfully prescribing cough syrup to a patient who has been diagnosed with HIV and is in need of ARVs.
Many companies with incompetent or unscrupulous Judicial Managers find themselves in this difficult position. Many times the Judicial Manager actually has a cough syrup factory.
I have been closely monitoring the Cairns Holdings story and have found the results quite impressive. When the Judicial Manager was appointed, the company was operating at 5 percent capacity. The Judicial Manager came in with great effectiveness and by March 2014, the company was operating at 35 percent capacity. These are the unique skills which are required in our current environment, proven turn around strategists who show measurable progress.
In contrast to the positive Cairns example, I have also seen many companies sink into deeper problems after being handed over to a Judicial Manager.
The unfortunate reality is that some Judicial Managers put their personal interests before the interests of the company and make decisions that harm the organisation they are meant to help. A doctor should not focus on money at the expense of the patient’s welfare. There have been cases where Judicial Managers do very little for a company but withdraw thousands of dollars in fees.
Some sinister Judicial Managers looking for a quick buck are actually happy if a company is placed under liquidation.
Working in cahoots with corrupt court officials they ensure they are appointed Liquidator so that they pocket a cool 3 percent of the value of the liquidated assets. It’s not all gloom though, there are many examples of Judicial Management excellence like the aforementioned Cairns transformation. Let’s have more of that.
Taurai Changwa is a Charted Accountant and the Managing Director of SAFIC Consultancy
