Times Of Swaziland: VIP LIQUIDATION: OVER E37M TAX DEBT, 900 JOBS AT STAKE

VIP LIQUIDATION: OVER E37M TAX DEBT, 900 JOBS AT STAKE
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Mbongiseni Ndzimandze on 06/04/2022 08:52:00


MBABANE – Jobs of approximately 900 employees of one of the oldest security
firms in the country, VIP Protection Services (PTY) Limited, are on the line.
The company yesterday obtained an interim order for voluntary liquidation and
one of the reasons, is that it purportedly owes Eswatini Revenue Service (ERS)
over E37 million in respect of unpaid VAT. A company usually applies for
voluntary winding up if its liabilities are more than its assets. This
essentially means that the company cannot operate its business function anymore
and can apply to be winded –up (liquidated). The interim order for the winding
up of the company was issued by Judge Bongani Sydney Dlamini. He also granted an
order for the appointment of Paul Mulindwa and Jose Rodrigues as joint
provisional liquidators of the security firm.
In her affidavit, in support of the application, Sarah Jane Thomson, who is the
director, informed the court that the applicant (VIP Protection Services (PTY)
Limited) carried on business of providing security services, including guarding
and cash security services in Eswatini. “The company  has been carrying on
business for a number of years, however, over  the last few years, it has
experienced financial difficulties, principally due to certain disputes that it
had with Eswatini Revenue Service,” submitted Thomson. She brought it to the
attention of the court that the most recent financial statements for the year
ended June 30, 2021, revealed inter alia that the total current and non-current
assets amounted to E11 294 192, while the liabilities amounted to E30 990
000.38.  Thomson informed the court that the company was insolvent and was
unable to pay its debts on an ongoing basis.
“The major cause of the company’s financial difficulty relate to a dispute
it has with the Eswatini Revenue Service (ERS). ERS has imposed a liability for
E37 958 159.45 in respect of unpaid VAT,” contended the company director. It
was further her submission that this amount comprised of a principal amount of
E17 971 519.05 and interest amounting to E19 896 640.40. “The amounts arise
from a legal fiction which has been created in the VAT Act of 2011. Over the
years, whenever, the applicant issues an invoice, that invoice includes a value
added tax at 15 per cent. The ERS requires the company on all invoices at the
end of the calendar quarter that invoice render whether or not payment has been
made,” she argued.
According to Thomson, in effect the company was required to pay VAT on monies
that it had not received and this had compounded over the years with the
application of penalties and interest. She averred that the applicant tried to
engage ERS on this issue and in particular to highlight that it was simply
unable as a business to pay over VAT to it (ERS) in the circumstances where it
(VAT) had not been paid to it.
Thomson said regrettably the ERS refused to accept this explanation and insisted
on payment, regardless of whether or not the company had been paid. She argued
that the company could not pay VAT it had not received as it did not have cash
flow to sustain this. The director pointed out to the court that all VAT had
been paid for and invoices rendered to ERS. “On December 14, 2021, the
applicant addressed a letter to ERS, seeking to enter into a payment arrangement
for the settlement of this debt and it (company) has attempted to make payment
thereof. However, ERS has rejected that proposal and has instead, placed such
stringent repayment terms that has made it impossible for the company to
trade,” alleged the director. As result of the company’s failure to address
the concern of the ERS, Thomson submitted that it was unable to obtain tax
compliance certificate, which in turn meant that it was unable to tender for any
work.  She said the company was unable to meet its financial obligations and
debts as and when these arose, however, the ‘artificial claim’ of ERS has
allegedly created an insolvent state of affairs.
Contended
Thomson contended that in light of the fact that this issue could not be
resolved, despite the company’s best efforts, it resolved to wind itself up on
the grounds of insolvency. “The company employees approximately 900 personnel
and although their jobs will be in jeopardy, the directors are duty bound to
ensure that the company does not continue to operate in insolvent circumstances,
where it is clear that it will not be able to trade its way out of the position.
These employees will most likely lose their jobs due this artificial debt
created by ERS,” submitted Thomson. She then informed the court that this was
therefore a proper case for the High Court to grant a winding up order in terms
of Section 287 of the Companies Act.
According to Thomson, the liquidation of the company would inter alia; enable
the liquidator to properly investigate the affairs, assets and liabilities of
the company, with a view to an equitable distribution of the residue thereof to
all creditors in their order of legal preference; enable the liquidator to more
readily collect any debts due and payable to the company; prevent the company
from incurring further debt in the course of ordinary business activities,
thereby increasing its liability to the obvious detriment of not only the
applicant but also other creditors. The director further argued that the
liquidation of the company would prevent it from conducting business in an
insolvent and/or fraudulent and reckless manner. The company was represented by
Lindokuhle Methula of Henwood and Company in Mbabane.