Monday, 30 May 2016

ZIMBA DUPED BY CHINESE PARTNER

Chinese tycoon, Lin Zhenxian, has been dragged to court by his local partner, Phidelis Muchabaiwa.


Muchabaiwa is demanding part of the US$5 million earned by a company in which he partnered with Zhenxian. In 2012, Zhenxian and Muchabaiwa entered into a partnership wherein the Zimbabwean partner was granted 51 percent shareholding in Chengchong Construction (Private) Limited.

Zhenxian owned the remaining 49 percent stake. Chengchong was then subcontracted by China-based ZTE Corporation to erect base stations for Econet. All payments due to Chengchong were to be made directly to ZTE Corporation, which is registered in China, with Zhenxian receiving money due to the joint venture company through wire transfer into his Chinese bank account.


Muchabaiwa would then get his portion after Zhenxian had been paid by ZTE Corporation.
But ever since the deal was consummated, Muchabaiwa has never received a single cent.
The dispute has now spilled into the High Court, where Muchabaiwa is demanding his dues. In papers filed at the High Court, Muchabaiwa also alleges that contrary to the partnership agreement, Zhenxian hosted several board meetings with his Chinese counterparts to whom he had distributed portions of his share in Chengchong, without him knowing.


He alleges that had he not been tipped off, he would not have known that Zhenxian was secretly disposing some of the company’s local assets, which included a house in Marlborough.

“In the event that Zhenxian disposes assets in the pending matter, I stand to be greatly prejudiced and would have no other remedy if an interdict from disposing the company assets is not granted. In the event that the business winds up, due process of the law must be followed in terms of the Companies Act to ensure that the interests of various stakeholders are safeguarded,” he said in his submissions.


In the notice of opposition, Zhenxian is dismissing Muchabaiwa’s action of approaching the High Court arguing that it is in contradiction with the shareholders’ agreement.

Clause 18 of the shareholders’ agreement stipulates that should any shareholder consider it necessary to institute legal proceedings, then such an issue shall be referred to a meeting of the board.


Zhenxian is also arguing that any disputes as enshrined in clause 19 of the agreement shall be referred and resolved by arbitration and the arbitrator’s decision shall be final.
The notice of opposition also challenges the interdict from disposing properties that were used during the construction projects on the basis that they were not purchased in the company’s name.


Zhenxian further argues that Muchabaiwa should separate himself from the company.
“It boggles the mind why one should sue himself when he has fully claimed to be the majority shareholder enjoying 51 percent stake,” Zhenxian argued in his opposing court papers.


Chengchong Construction was granted a trading licence by the Zimbabwe Investment Authority in 2012. The licence is due to expire early next month.
At the time of its establishment, Chengchong made an undertaking to invest the sum of US$317 000 and a further US$650 000 in the country from offshore sources. Financial gazette

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