Further Analysis of MTI’s Proposed Business Rescue Plan

In a recent webinar, Advocate Carlo Viljoen outlined a comprehensive business rescue plan for Mirror Trading International (MTI), currently under liquidation. This proposal offers a potentially constructive path forward for creditors and stakeholders, but it warrants a closer examination for accuracy and feasibility.

This is a summary excluding to a large extent the challenging situation already in place due to Judge de Wet's Ponzi declaration and various other cases that will influence the BRP application.

You should also read; https://getaquid.com/mti-business-rescue-plan-application/ which examines some of the legal challenges.

Summary of Webinar Claims

  • Business Rescue Post-Liquidation: An application for business rescue can be made at any stage after liquidation proceedings have begun.
  • Suspension of Legal Proceedings: All legal actions, including liquidation and collections, are suspended once a business rescue application is filed.
  • Feasibility of the Business Rescue Plan: The plan involves preserving capital and generating returns through investments and trading.
  • Impact on Creditors and Legal Proceedings: Business rescue would halt all current summonses and legal actions against creditors.
  • Role and Power of the Business Rescue Practitioner: The practitioner will work with greater transparency and creditor involvement than liquidators.

Commentator's Analysis

The claims from Advocate Viljoen’s webinar provide a hopeful yet optimistic view of the potential for business rescue in a challenging situation. Below are some critical reflections on these claims:

  • Business Rescue Post-Liquidation: While legally possible, successfully reversing a liquidation through business rescue is rare and complex, requiring substantial evidence of viability.
  • Suspension of Legal Proceedings: The suspension of proceedings requires court approval, not just the filing of a business rescue application.
  • Feasibility of the Business Rescue Plan: The success of this plan depends heavily on the actual availability of funds and realistic returns on investments, warranting an independent audit and feasibility study.
  • Impact on Creditors and Legal Proceedings: Creditors should seek independent legal advice and not disregard legal notices until an official stay of proceedings is confirmed by the court.
  • Role and Power of the Business Rescue Practitioner: The effectiveness of this approach depends on the practitioner’s management skills and active stakeholder involvement.
  • Legal Team's Initial Comments on Business Rescue Feasibility for MTI:In light of recent discussions surrounding a potential business rescue plan for Mirror Trading International (MTI), our legal team has conducted a preliminary review based on the current legal framework and the specifics of MTI's situation. It is important to note that MTI has been officially declared a Ponzi scheme by Judge de Wet in her judgment. This declaration categorizes MTI's operations as illegal under South African law.

    Given this classification, the prospects of successfully instituting a business rescue plan are significantly constrained. South African corporate legislation, particularly the Companies Act of 2008, is designed to facilitate the rescue of financially distressed but inherently lawful enterprises. The Act aims to preserve jobs, rehabilitate the company, and ensure a better outcome for creditors and stakeholders than liquidation would likely yield, provided the business is legally sound.

    However, for MTI, which has been legally judged as engaging in fraudulent and illegal business practices, the scenario differs markedly. The principle that a business declared a Ponzi scheme—an illegal operation—cannot typically be subjected to a business rescue process is rooted in both legal and ethical grounds. The court system and regulatory framework focus on liquidating such entities and taking appropriate legal action against those responsible for the fraudulent activities, rather than attempting to preserve or continue their operations.

    Unless the judgment declaring MTI a Ponzi scheme is successfully appealed and overturned, the likelihood of a business rescue plan being approved or deemed appropriate by the courts remains highly unlikely. This stance is aligned with the prevailing legal interpretations and the fundamental objective of protecting public interest and maintaining the integrity of the commercial landscape in South Africa."

The enthusiasm for rescuing MTI is commendable, yet stakeholders are advised to remain cautious and seek further independent legal and financial advice before proceeding. The plan's success will largely depend on meticulous execution and transparent management.

For detailed updates and further analysis, stay tuned to our blog.

 


Legal Disclaimer: The information presented in this blog post is intended for informational purposes only and should not be construed as legal advice. The views and analyses expressed here are based on interpretations of public discussions and do not necessarily reflect all possible outcomes or the full legal complexities of the matters discussed. We do not guarantee the accuracy or completeness of the information provided and recommend consulting with a qualified legal professional for advice on specific legal issues related to the topics covered in this post. No reader should act or refrain from acting on the basis of any content included in this site without seeking appropriate legal advice from a properly licensed attorney. The contents of this blog post do not create an attorney-client relationship between the reader and any legal professionals involved in the drafting of this content.

2 Comments

Ludo Vanhees · 22/04/2024 at 6:40 am

Thank you for the last Post. As a net looser I am a bit wary about this Business Rescue Plan. What can we expect to get back? Would the bitcoin we had be restored as it was? This will obviously be difficult. What if the application fails? What are the consequences? It is of course good for all the net winners who already took out and they would escape being forced to pay back what they took out. How long will such a procedure take? How much will it cost? With the bitcoin being now so high it would of course be fantastic if we can recup our bitcoin but how will they do this? At the same time with the bitcoins which are still available the liquidators have now the means to pay back the net loosers. I will need a lot of answers before I can make an informed decision.

    PfoJC · 22/04/2024 at 5:55 pm

    Thank you for sharing your concerns and questions regarding the Business Rescue Plan. Your cautious approach is completely understandable given the complexity and the stakes involved, especially for net losers who have already faced significant losses.

    Firstly, it’s important to clarify that if the BRP is successfully implemented, it doesn’t necessarily mean that bitcoins or funds will be restored exactly as they were. The goal of the BRP would be to restructure the company’s assets in a way that maximizes returns to creditors, but this can depend on various factors including the available assets, the legal constraints, and the market conditions. The actual recovery could come in different forms and might not equate to a full restoration of lost bitcoins.

    If the BRP application fails, the company would likely continue in liquidation under the current liquidators, who would proceed with their efforts to recover and distribute assets according to the liquidation laws and the court’s directions. This could mean continued legal actions against net winners and possibly slower distributions to creditors.

    As for the timeframe and costs, these are indeed significant considerations. Business rescue processes can be lengthy and costly, involving legal fees, administrative costs, and potential delays in recovering and redistributing assets.

    Regarding the high value of bitcoin currently, while it presents an opportunity for significant recovery, leveraging this effectively within the legal and practical constraints of a BRP or liquidation process is challenging. The liquidators do have the means to begin compensating net losers; however, the efficiency and fairness of this process have been points of contention.

    We share your concern about the approach taken by the liquidators, which many perceive as overly aggressive and not necessarily in the best interest of all creditors. The BRP, despite its legal hurdles, may provide a critical leverage point to challenge these practices and push for a more equitable handling of the liquidation process.

    Before making any decision, it’s crucial to gather as much information as possible and perhaps consult with legal and financial advisors who can offer tailored advice based on the evolving situation. We are committed to providing updates and insights as they become available, helping you and all stakeholders make informed decisions.

    Your vigilance and need for thorough information are exactly what’s needed as we navigate these complex issues together. Thank you for being an active part of this community and for your ongoing engagement.

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