Insolvent SABC puts directors on thin ice
The SABC’s board of directors could be declared delinquent as the embattled public broadcaster is trading under insolvent circumstances. Its falling revenues mean it cannot service its debt of almost R2bn.
The Companies Act states it is illegal for directors of an insolvent company to continue trading after they become aware of its insolvent status, notes Business Day.
The broadcaster is struggling with a huge infrastructure maintenance backlog and an unsustainable wage bill. The SABC recorded an unaudited loss of R483m in the 2018/2019 financial year. A year earlier it incurred a loss of R622m. The corporation’s dire financial situation worsened during the 2018/19 financial year and it ended March 2019 with a cash balance of just R72m.
It has requested a R3.2bn government guarantee to stay afloat and to pay off some of its debt, but its bid for funding has so far been unsuccessful.
Briefing Parliament’s Select Committee on Public Enterprises & Communication yesterday, CFO Yolandi van Biljon said that in December 2018 the Companies and Intellectual Property Commission (CIPC) issued a notice to the corporation in terms of the Companies Act to show cause regarding reckless trading or trading under insolvent circumstances.
‘A response was provided to the commission; however, the commission indicated that the situation will be monitored closely. CIPC is following up on this matter on a monthly basis,’ said Van Biljon, adding: ‘Trading under insolvent circumstances is accepted to mean that a company does not meet the solvency and liquidity test criteria. Currently the SABC is unable to pay its debts, in some cases in arrears of six months. This will be directly contravening the Companies Act, and if that is the case, may lead to liability for the directors.’
Van Biljon told MPs that one of the main contributors to the corporation’s dire financial status was the funding model, which has an over-reliance on commercial and advertising revenue.
Another factor is the changing media consumption and audience needs, as well as how multi-national advertisers have reduced spending over the past 24 months.
According to an EWN report, Van Biljon told the committee that the corporation was also unable to honour certain payments due to a shortage of cash.
‘There are instances where we are unable to honour payments and even adhere to committed contracts which means we often need to negotiate and renegotiate because we’ve been unable to meet the requirements. Naturally, it has a significant effect on our content productions and the creative industry,’ she said.
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