Valor IT escapes liquidation

Mergers, Acquisitions and Financial Results

A contract canned by trade and industry minister Rob Davies is at the heart of a legal wrangle between Valor IT and Blue Turtle.
Valor IT has agreed to pay Blue Turtle R2.8 million in a last-ditch attempt to stave off liquidation.

An urgent application for Valor IT's liquidation was filed in the North Gauteng High Court on 12 September, after it failed to pay $250 000 (currently about R2 million) a court had ordered it to settle. Blue Turtle went to court to request that the company be liquidated after it failed to pay the amount, which Blue Turtle claimed after Valor IT cut it out of a deal.

Blue Turtle sued Valor IT after Valor IT circumvented it in a profit-sharing deal related to software for an enterprise content management (ECM) system installation at the now-defunct Companies and Intellectual Property Registration Office (Cipro).

In January, judge RD Claassen ruled that Valor IT must pay up after cutting Blue Turtle out of the government deal to provide software for the Cipro ECM implementation, going straight to US-based company Vignette instead.

Valor IT lost its bid to have the judgment overturned and then failed to pay up, instead offering to settle at R1.5 million, a deal that Blue Turtle rejected.

The liquidation application was set to be heard last Friday, but on Thursday, Valor IT signed an acknowledgement of debt and agreed to pay a total of R2.8 million, says attorney Gert van der Merwe, of Van der Merwe and Associates, who acts on behalf of Blue Turtle.

Valor IT has undertaken to pay R2.8 million by the end of this month, says Van der Merwe. If the company fails to stick to the court-sanctioned agreement, the attorney will proceed with liquidating it, he adds.

In addition, chairman Josias Molele has signed surety for the debt. If the company fails to pay, he will be held personally liable, says Van der Merwe.

This may see his personal assets being attached, or even Molele's sequestration, if the payment is not forthcoming, Van der Merwe says. However, Molele will be allowed a week to settle after the due date passes, he adds.

Valor IT has agreed to pay R2.5 million as part of the settlement, and R300 000 in costs and interest. Molele says: “I agreed to pay because this is business that I still want to do.” He notes that the company recently won a “big” enterprise content management deal, but would not provide further details.

Valor IT's R153 million contract, to install an ECM system at Cipro, was canned last year by trade and industry minister Rob Davies after irregularities were uncovered during the awarding of the contract.

Blue Turtle argued in the initial case that Valor IT breached a contract based on a deal that Blue Turtle would assist the company in implementing the tender.

The agreement between the two companies was that Blue Turtle would buy software from US-based Vignette for $1 million (R8 million), and the software would then be sold to Cipro for $1.4 million (R11.3 million), with the profit being shared by the two companies.

The judgment found Valor IT cut Blue Turtle out of the deal, and went straight to Vignette, saving itself $100 000 (R807 000). Valor IT argued Blue Turtle misrepresented itself as being a Vignette distributor, when it is only a reseller.

Cipro had already paid Valor IT about R95 million by the time Davies put an end to work on the ECM system. The implementation was meant to enhance Cipro's infrastructure to cut down on fraud.