ANCYL faces new liquidation threat as creditors come calling
The ANC Youth League's liquidation woes are not quite over with a new creditor knocking on its door, and if it is made insolvent the league could cease to exist, according to insolvency experts.
"It would cease to exist as a functioning organisation per se, once the winding up is complete," said Martin Yudaken, a partner at Webber Wentzel specialising in commercial litigation and insolvency.
The ruling ANC heaved a big sigh of relief when the liquidation crisis facing its beleaguered youth league was resolved in March, thanks to a timely cash injection.
The nearly R15-million the league owed Bloemfontein events company Z2 presentations for its notorious 2008 conference, where Malema was elected, was cleared thanks to an out of court settlement.
The conference made headlines when it erupted into chaos with delegates mooning the media. A second applicant, Palanquin Hospitality Management who was owed R1.5-million for accommodation at the same conference, also settled with the league at the time, and the Johannesburg high court Judge Phillip Boruchowitz discharged the provisional liquidation order made in November last year.
The amount settled on was not disclosed to the media but the Mail & Guardian understands it left the creditors happy.
"We are not aware of any other debt at this point ... We are not expecting any further legal challenges," said youth league national convenor Mzwandile Masina at the time.
However another creditor has been encouraged by that happy resolution: Gallagher Convention Centre has asked for the R4.8-million it is owed from the league's June 2011 conference where Malema was re-elected, leaving the league facing possible insolvency yet again, according to an application made to the high court in Johannesburg on Thursday.
With interest, that figure is likely to be closer to R7-million, sources says.
Lawyers for Gallagher Convention Centre are calling for the league to be placed under final liquidation or provisionally sequestrated. The case has been set down for May 19, in the event of the application not being opposed.
The ANC has limited options available to it. It could oppose the liquidation, which could be a drawn-out affair. Or it could go ahead, in which case the existing league will be wound up as an organisation and a liquidator would deal with its assets and the claims of creditors. It could then start a new league, with a clean slate.
However the process of insolvency is a far-reaching one, which could involve previous leaders such as Malema being called in to give account for the league's past affairs and financial records being scrutinised. Given how closely linked the ANC is to its leagues it would potentially open the party's books to unwelcome attention, several legal sources have told the M&G. The parties would want to avoid such scrutiny if any money received from or given to the league was not used for its proper purpose.
Therefore the party would be forced to settle out of court again.
"What this application was designed to do is force the ANC to cough up because they don't want people to look too closely," said a legal expert familiar with the case. The fact that a third creditor has come forward now that the ANC has settled with the previous two was to be expected. "They've opened a door and it's never going to stop."
There is another factor motivating the ANC to settle its league's financial affairs as quickly as possible. It needs to finish the work of reconstituting the organisation.
The league has been in something of a crisis of legitimacy with unelected appointed leaders representing the historic organisation and trying to rebuild its dissolved structures across the country. The league was left in near ruin when its leadership under Julius Malema was ousted in April 2012. The national task team was appointed shortly after, which dissolved most of the league's structure, and it has been tasked with holding regional and provincial conferences to rebuild the structures and put in elected representatives nationally by the end of the year.
The league's spokesperson Bandile Masuku was not able to comment on the application as the league had yet to hear about it. "We need to verify everything first and then take it from there," said Masuku, who said he would comment at a later stage.