PCL ordered to pay billions over PTC collapse

Press Corporation PLC (PCL) has been hit with a multibillion-kwacha bill over the collapse of its former retail giant, Peoples Trading Centre (PTC).

The Court has ordered PCL to pay K7.07 billion to the liquidator of PTC, after finding that the conglomerate allowed its wholly owned subsidiary to continue operating and accumulating debts despite being aware of its serious financial difficulties.

In a ruling Justice M. Msungama found PCL directly culpable for PTC’s insolvency, saying the parent company had control over the retailer and was aware of its deteriorating financial position.

The court heard that PTC continued trading and accumulating liabilities for nearly seven years despite being insolvent, leaving hundreds of creditors, suppliers, former employees and other claimants unpaid.

According to the ruling, PCL was PTC’s sole shareholder and had significant control over the affairs of the struggling retail chain. The court found that despite being aware of the company’s financial challenges, PCL allowed PTC to continue incurring liabilities.

Justice Msungama consequently ordered PCL to pay K5.99 billion in liabilities owed to nearly 300 creditors.

The court further ordered the conglomerate to pay K1.55 billion in terminal benefits owed to former PTC employees.

However, after taking into account K473.8 million recovered through the sale and liquidation of PTC assets, the court arrived at a final amount of K7,071,493,241 payable by PCL.

The liquidator had also sought additional amounts, including interest, collection charges, compensation, liquidators’ fees and exemplary damages. However, the court dismissed those claims.

PCL was further ordered to pay 70 percent of the applicant’s party-and-party costs.

PTC, once one of Malawi’s prominent retail chains, was placed under liquidation in October 2022 after efforts to reorganize and revive the struggling company failed.

The ruling could bring relief to the nearly 300 creditors and former employees who have been waiting for payment following the retailer’s collapse.

The court’s decision also highlights the responsibilities that parent companies may bear when exercising control over subsidiaries facing serious financial difficulties and insolvency.