E2M SALE OF UNITED HEALTH MEMBERSHIP

MBABANE - United Health Insurance Limited sold membership to its medical scheme, Lidwala Insurance Company Limited for E2 million.

This is contained in a purchase agreement between the parties, which has since been made an order of the court. The court application for the registration of the approval of the purchase was filed by the Financial Services Regulatory Authority (FSRA). The purchase agreement between United Health Insurance was approved by FSRA on March 3, 2023. In its application, FSRA submitted that it was the regulator of the insurance company in the country. It brought it to the attention of the court that it received an application from the first respondent (United Health Insurance Limited) seeking approval of the sale of its Health Insurance  Book ( membership to its medical scheme to the second respondent ( Lidwala Insurance  Limited).

Documantation

The applicant informed the court that, having considered the application and the relevant accompanying documentation, it resolved to approve the transaction.  It was further the applicant’s (FSRA) averment that the transaction complied with all the statutory prescripts including all regulatory considerations.  According to the agreement which is annexed to the application, United Health Insurance would grant Lidwala managed care team, access to all active case management for all active hospitalisation and would provide all underwriting information per member immediately   upon signing of the agreement. 

It was agreed that Lidwala Insurance would take over the responsibility of claims. During the signing of the agreement, United Health Insurance was represented by its Managing Director Doctor Mzingaye Ndlovu while for Lidwala Insurance Limited was Doctor Thokozani Nkambule. The purchase agreement between the parties was made an order of the court by Judge Mumcy Dlamini on Friday.  The sale of the health book by United Health Insurance Limited comes after it successfully moved an application to be placed under liquidation.

Property

Liquidation is a process in which a company is brought to an end. Also, the assets and property of the company are redistributed to the creditors and owners. Liquidation is also referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation. Per an audit that was done by FIPS on March 10, 2023, the net shareholders value of the company (United Health Insurance) amounted to E702 330. The auditors found that, the total assets of the company exceeded its total liabilities by the figure mentioned above.

In its application, the company submitted that the relief for winding up and liquidation was primarily based on the following circumstances;  that it  was no longer able to service its claim liabilities (losses ) that were necessitated by COVID-19 infections and its  sustainability and validity was not guaranteed given the defined asset cover ratio to be maintained all times. Ndlovu, who was the deponent in the application for liquidation, further brought it to the attention of the court that the company ceased operations as a business since December 31, 2022.  

He averred that the applicant had taken a resolution to voluntarily wind up.  Ndlovu averred that he had been advised and believed to be true that where a company was unable to pay its debts, it was justifiable and equitable to have it wound-up. “The applicant has liabilities in excess of the sum of E7million and in view of the fact that the applicant is no longer trading, winding up the applicant was justifiable,” submitted Ndlovu.  He argued that it was, therefore, just and equitable that the applicant be wound-up as contemplated in Section 287 (e) of the Companies Act. He submitted that he had been advised that a company could voluntarily wound-up, where it had taken a special resolution to be liquidated and such resolution registered with the registrar of companies. It was further his submission that he had been advised and took it to be true that, a company may be wound-up by the court upon application by it or its creditors.

Distress

Ndlovu highlighted that pursuant to a meeting of the applicant’s directors and after careful consideration of the insurmountable financial distress, the applicant found itself in, it had no hope of resuscitating its business. “Consequently, the directors by a special resolution  during the company’s general meeting held on March 4, 2022 resolved to voluntarily wind up the applicant,” alleged the deponent.   He submitted that the resolution had been lodged with the registrar of companies in terms of Section 177 of the Companies Act. 

Ndlovu alleged that pursuant to the resolution being registered, the matter of the High Court also issued a certificate for security for costs. “The applicant does not have any assets of its own as it merely operated a subsidiary company. The applicant has a cumulative loss balance of E7 985 874,” argued Ndlovu. The application for liquidation is still pending in court. In the application of liquidation, Lidwala was represented by lawyers from S.V Mdladla & Associates.

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