Court lends Precious Time to FirstCred

• Declines application to liquidate the company
• Places it instead under judicial management
• 600 jobs hang in the balance

Instead Justice Zein Kebonang ruled that the company placed under judicial management, much to the pleasure of the CEO of FirstCred, Dudu Garekwe, who opposed the liquidation.

The creditors had argued that the company was unable to service its debt and so should be liquidated but the judge saw things differently. “In terms of the discretion conferred on me by section 371 (1) of the companies act, I think a judicial management order would, as alternative to the winding up of the company, be an appropriate order as it would protect all creditors and should therefore be given a change,” he ruled. “Having decided to place the 1^st respondent under judicial management, it is for the parties to advise the Registrar on their choice of judicial manager.”

While he noted that a company may be wound up by a court if the court is of the opinion that it is just and equitable to do so, Justice Kebonang concluded that the remedy has been described as one of last resort and an exceptional one in the context of disputes between shareholders. He added that Section 371(1) of the Companies Act requires the court to decline to make a winding up order where some other remedies are available. “The burden of proof is on the petitioner to establish its entitlement to the relief and, if it so succeeds, the burden of proof then shifts to the 1^st respondent to prove that the petitioner has unreasonably failed to pursue some other available remedy other than the winding up order,” the judge pointed out.

The company’s CEO Garekwe had said she believed judicial management provides the most optimal avenue for First Cred to repay all its creditors because “the fundamentals of the business remain sound and can be leveraged through appropriate refinancing initiatives”. A winding up of the company would have closed the doors of the company to fully investigate and bring to book those responsible whereas judicial management also offers prospects to deal with investors through either conversion of their investments or other suitable arrangements that ensure that as much value is recouped, she had asserted.

In addition to having some property investment interest, FirstCred provides micro-lending and insurance products in Botswana. The company was established in 2012 and has risen, according to the CEO, from nothing to become one of the top five micro-lenders in Botswana focused on the underbanked market and thus persons and entities who have had limited access to finance, including micro loans and insurance and have been snubbed by the formal banking sector.

Garekwe told court that over the past decade, FirstCred (whether under its original name GetBucks or under its current name) has made over 500 000 loans worth over P1 billion to its clients in both the private and public sectors. “First Cred has thus been a significant proponent of financial inclusion in Botswana,” she said. “Its greatest impact has been in funding education, healthcare and funerals, and in providing startup loans for small businesses.”

She argued that a liquidation would thus also have a significant impact on a market that is already deprived of financial services, in addition to causing considerable hardship to the hundreds of employees, agents and other service providers who derive their livelihood from FirstCred. Garekwe noted that there are 590 employees across the FirstCred Group. “A liquidation of FirstCred would furthermore be likely to dissuade other investors from positively viewing companies which serve low-end clients,” she said.