Sunday, February 25, 2018

Freeze on CL assets

State gets green light to appoint liquidators

LEAVING COURT: Senior counsel Deborah Peake, who represented the Government, leaves the Hall of Justice last night. —Photo: CURTIS CHASE

port of spain
THE State has been given the green light to appoint joint provisional liquidators to preserve the assets of CL Financial (CLF) as it seeks to recover a multi-billion-dollar debt following its bailout of the conglomerate in 2009.
This comes after the Court of Appeal yesterday overturned a ruling handed down by High Court judge Kevin Ramcharan last Wednesday in which the judge dismissed the application on the ground that it was made prematurely.
Following a marathon sitting at the Hall of Justice in Port of Spain that lasted about seven hours, Justices of Appeal Peter Rajkumar, Charmaine Pemberton and Andre Des Vignes unanimously agreed that Justice Ramcharan erred in law when he dismissed the application.
In the ruling which was delivered by Justice Rajkumar, the judges said they were satisfied with the arguments put forward by the State on the need to have the liquidators appointed as it seeks to recover the $15 billion debt.
With the ruling, there is now a freeze on the company's assets and it is no longer allowed to continue trading until the hearing and determination of another action filed by the State to wind up the company. That hearing was scheduled to be heard by Justice Ramcharan yesterday but was adjourned to today given the appeal.
Justice Ramcharan had ruled that the application was made prematurely since the State was unable to offer proof that if the composition of the board had changed it would have disposed of the assets to the detriment of the State.
The Government has bailed out CLICO and CL-related companies to the tune of more than $23 billion but to date, just about $7 billion has been repaid.

The CL plan

The application to have liquidators appointed came after the State was given notice that non-government shareholders were seeking to have a majority membership on the company's board of directors, and effectively take control of the company from Government.
The shareholders, who were represented by attorneys senior counsel Ramesh Lawrence Maharaj and John Jeremie, were initially seeking to have two more non-government shareholders, Carlton Reis and Kirk Carpenter, appointed to the board during a special general meeting yesterday afternoon.
Once they had gained control from the Government, the board would have sought to continue trading in an attempt to make profits to repay the State. However, the Government, which was represented by senior counsel Deborah Peake, contended that the assets have less monetary value than the debts owed and there is a strong possibility that if the company were to continue trading, it may incur more losses and the debt may never be repaid.

Government in control

At the start of the hearing, Jeremie submitted that the application to have the liquidators appointed was no longer urgent as was being argued by the State, since both Reis and Carpenter had decided they would not present themselves at yesterday's meeting to be appointed as directors on the board until no earlier than the end of October.
Therefore, he said, Government remains in control of the board until then.
“There is no immediate or imminent threat of the composition of the board changing over the next three month, therefore, there is no need for the court to grant the order for provisional liquidators to be appointed. The government is and will remain in control until at least the end of October,” said Jeremie. However, the judges said even though this was so, the issue at hand remains a live one and would eventually have to be settled.
Senior counsel Lynette Maharaj, who held for Lawrence Maharaj during the hearing, stated that since 2009 Government had control of the board but had failed to take any action to recover the debt.
“I understand that the Government has a concern how its debt is to be repaid and these shareholders want to repay the government but they are not getting the co-operation of the government.”
In response to this, Peake submitted: “We did not rush to have the company wound up. We came to court when it became clear that the company does not have the assets to pay its debt...
“An insolvent company is not supposed to be trading. This company is not temporarily insolvent, this company is chronically insolvent.
“Since 2009 the Government has been in rescue mode to see what can be done to recover the debt without liquidation but there comes a time when enough is enough. This application is to stop the haemorrhaging of the company.”
She said the company continues to spend $3.5 million on a monthly basis to keep itself afloat, but this money could have gone towards repaying its creditors.
“Insted of paying the creditors, you are creating more debt. These are not insignificant sums. Just because the amount owed is in the billions, does not mean that the millions being spent is insignificant,” submitted Peake.