By Lehlohonolo Lehana.
The Western Cape High Court Monday approved a $1.6 billion (R25 billion) payout by embattled retail giant Steinhoff to settle fraud claims that emerged in 2017.
Tens of thousands of claimants have sought more than $8 billion in compensation after an accounting scandal sent share prices plunging 98 percent.
After years of litigation and negotiation, the High Court sitting in Cape Town agreed to the proposal in a two-page ruling delivered in a 30-minute hearing.
The settlement will cover a portion of each claim, if the claimants withdraw their separate lawsuits.
The clothing and furniture retailer is listed in both Frankfurt and Johannesburg.
Two of Steinhoff’s managers still face trial in Germany.
A court in the Netherlands, where Steinhoff is domiciled, has already approved the company’s settlement plan.
This after the court ruled last year against Steinhoff International Holdings N.V.’s (SIHNV) argument that a South African court does not have jurisdiction to liquidate the company.
Dismissing the application with costs, as well as the costs of two counsel, judge Hayley Slingers found that a South African court would have jurisdiction, while Steinhoff and the two other parties claimed that Steinhoff is an external company established in the Netherlands and cannot be liquidated in South Africa in terms of the Companies Act of 2008.
The applicants claimed that chapter 14 of the old Companies Act of 1973 is still valid for liquidating insolvent companies and the definition of a “company” includes an external company. The 2008 act has a separate definition for an external company.
The former owners of Tekkie Town applied for the liquidation of Steinhoff because they say it cannot pay its debts any longer. The former Tekkie Town owners sold their business to Steinhoff five years ago for shares in SIHNV.
Steinhoff’s CEO Louis du Preez has described a decision by the Western Cape High Court to approve the retailer’s settlement proposal as a “big milestone” in its restructuring process.
“This is a big milestone in our three-step plan,” said Du Preez.
“We have maintained throughout that this is the best outcome for all the stakeholders.
“Our immediate attention will now be on implementation of the settlement and medium- and longer-term focus on step three of the restructuring plan.”
Steinhoff’s three-step plan refers to the retailer’s blueprint to restructure and rebuild its business in the wake of the accounting scandal that broke in late 2017.
Steps one and two encompassed making deals with creditors to delay repayments and “managing litigation risk” so that court cases do not force it out of business.
Step three of the plan, meanwhile, refers to restructuring the group to reduce debt and high financing costs.