Bid to block KFC�s liquidation fails
Brian Benza | Friday September 2, 2016 14:55
Despite VPB, through its proprietor Anthony Siwawa, putting up a fight to save the business from final liquidation, Leburu pronounced it just and equitable for the operation to be wound up considering that its franchise agreement has been terminated while it has also failed to service a P41 million FNBB loan among other creditors.
FNBB, through CEO Steven Bogatsu had petitioned for the final liquidation of VPB Propco and three other related companies, which Siwawa was contesting.
The KFC Botswana business was run through four connected companies being VPB Propco, the franchise holder, QSR food Company and Boitumelo Dijo, which between themselves held leases and trading licences for the 12 KFC outlets.
The fourth company, Greenax Limited, which was cited as the fourth respondent in the petition, only operated in–store point sale machines and received cash from the 12 outlets.
Following an urgent petition by FNBB, KFC Botswana was placed under provisional liquidation on June 2, 2016 with the provisional liquidator Nigel Dixon-Warren later determining the franchise’s total creditors at P106 million.
Among some of the largest creditors is FNBB, which was the lead petitioner for the company to be placed under liquidation over a P41 million debt. Other banks such as Stanbic and Barclays are owed various amounts as well. Franchise holder, Yum Restaurants is reportedly owed about P21 million comprising franchise, advertising and trading fees.
Botswana Unified Revenue Service (BURS) is allegedly owed about P4.9 million among other creditors.
Presenting the case for the company not to be placed under final liquidation, Siwawa denied that the business was insolvent and also disputed they had breached any of the loan agreements with FNBB. VPB was also contesting the inclusion of Greenax in the petition arguing that the company, although connected to the KFC business, was not a creditor to FNBB.
According to the loan agreement, FNBB advanced the loan to VPB Propco while QSR Food and Boitumelo Dijo generated the income and provided surety for the loan. Siwawa was also contesting the final liquidation of VPB Propco arguing the company was not only incorporated to sell chicken, but can venture into other lines of business.
Siwawa also accused FNBB, Yum and a potential buyer, Callus of colluding to sell the business at a cut price of P60 million ‘instead of P151 million being a reasonable value for the KFC Franchise’.
However, Justice Leburu punched holes into the respondent’s defence saying that although Greenmax did not have an arrangement with FNBB, by receiving the funds generated by the stores, the company placed itself within the tentacles of the creditors.
On the termination of Yum’s deal, Leburu said that the franchise agreement provided the substratum under which KFC Botswana functioned. “Once the franchise was terminated, the wind was taken away from the respondents’ sails.
“On insolvency matter, evidence before court shows that the liabilities of the business exceeded the assets by P22 million. “The respondents have also not demonstrated that they can be able to venture into any other business besides selling chickens to generate income. Blatantly put, they are in financial doldrums. The respondents have also made several proposals to their creditors on how to settle the debt. Such a compromise amounts to an act of insolvency in terms of the laws of Botswana,” ruled Leburu.
Evidence that was also brought before the court showed that the KFC Botswana business has had no audited financial statements since December 2013 while its tax returns have not been filed since 2005.
The judge also shot down Siwawa’s proposal that the four companies be placed under judicial management instead of final liquidation saying nothing has been placed before him to suggest that by proper management, the four companies will be able to overcome their precarious financial status.