Collapsed Group Five shareholders consider class action
Group Five shareholders, who are likely to walk away empty-handed after the collapse of the construction firm, are considering suing directors for allegedly misleading them about the circumstances leading to its collapse.
The company, valued at more than R8bn in 2007, went into business rescue in March after it failed to get additional funding from its lenders. Like its peers, it was crippled by a sharp drop in infrastructure spending.
A disastrous contract in Ghana cost it more than R1bn in financial 2018, notes BusinessLIVE.
Business-rescue practitioners Dave Lake and Peter van den Steen on Thursday said the company was unlikely to settle all of its obligations.
David Swartz, a representative of some shareholders, said investors were considering a class action against the company and its directors. Lake said: 'The practitioners are of the opinion that there is a reasonable prospect of achieving a successful business rescue and to provide value to creditors', but warned that, taking into account retrenchment costs and multiple claims against it, Group Five would be unable to pay in full what it owed creditors. Given that it was unlikely all creditors would be reimbursed in full 'it is expected that no value will flow to shareholders through the business rescue process', he said. ' ... (shareholders') shares and investments in the company are worth not much at all.'
Swartz said shareholders were aggrieved with the company's disclosure of information ahead of the institution of the business rescue.
Group Five denied the allegation, saying it had issued several announcements signaling its precarious financial position and the steps it was taking to address its liquidity problems.
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