Steinhoff's route to concluding a settlement with claimants may have got trickier after the Western Cape High Court found that it breached the Companies Act two years ago.

The case against Steinhoff, which Judge Lee Bozalek said raised ‘complex issues of law and fact’, was brought by Trevo Capital and Hamilton, two companies that have instituted multi-billion rand claims against it.

It was argued over six days in late May and early June.

A Fin24 report says Bozalek has ruled that, in August of 2019, Steinhoff had provided financial assistance to an entity in its stable called Lux Finco 1 as part of a restructuring. This occurred long after its CEO Markus Jooste resigned in December 2017.

According to section 45 of the Companies Act, a board can only provide financial assistance (or take on new debt) if it satisfies the solvency and liquidity test.

‘(Steinhoff's) directors would, at the least, have had difficulty in satisfying themselves, acting reasonably, that the company would satisfy the solvency and liquidity test,’ said Bozalek.

Steinhoff had argued in court that it did not take on any new debt or provide financial assistance during a restructuring in August 2019. It maintained that the contingent payment undertaking (CPU) it entered into simply deferred or ‘restated’ its obligation to pay €465m in debt it incurred back in 2014.

But Bozalek found this argument unconvincing, saying it was ‘disingenuous’ to suggest that the restructuring merely replaced one debtor with another with the same terms and conditions.

He declared a board's resolution to authorise the CPU in August of 2019 void, and ruled that Steinhoff had incurred the debt legitimacy back in 2014, finding Trevo's arguments that this debt should also be declared void as unconvincing.

Full Fin24 report

Judgment