A group of 48 shareholders of embattled construction company Group Five have instituted legal proceedings against the company and its business rescue practitioners (BRPs).

In terms of the application, the shareholders seek, among others, to set aside the resolution adopted by the shareholders at an annual general meeting (AGM) in November 2017 during which the company was authorised to provide direct or indirect financial assistance to one or more related, or inter-related, companies.

They are also seeking to set aside the guarantee provided by the company to various finance institutions guaranteeing the financial obligations owed by Group Five Construction to those institutions.

Further, they are seeking to convert the business rescue proceedings of the company to liquidation proceedings.

The shareholders are represented by SWVG Inc Attorneys, which initially addressed a letter to the BRPs during July 2019 requesting a substantial amount of information relating to, besides others, the financial and governance affairs of the company prior to the start of business rescue proceedings.

The BRPs' attorney, Werksmans Attorneys, have been engaging with SWVG since July 2019 and have provided SWVG with the information that the shareholders were entitled to receive in terms of the Companies Act, according to a statement on June 9.

However, SWVG has subsequently challenged the validity of the aforesaid financial guarantee.

In responding thereto, the BRPs and Werksmans sought the advice of senior counsel regarding the validity of the special resolution and the board resolution in terms of which the guarantee was authorised and issued.

The senior counsel, however, found that the special resolution and the board resolution complied both in substance and form with the provisions of the Companies Act.

The BRPs, meanwhile, maintain that the guarantee issued in terms of the special resolution and board resolution is “not void and not capable of being set aside”.

Given the orders that the shareholders are seeking and the impact that this will have on the business rescue proceedings of the company, which is currently being implemented in terms of the approved business rescue plan, Werksmans will be opposing the application on behalf of the BRPs and the company.