Malawi court orders Press Corporation to pay millions to creditors of collapsed retailer PTC

High court finds conglomerate “directly culpable” for insolvency of Peoples Trading Centre after years of trading while insolvent

Malawi’s high court has ordered Press Corporation Plc (PCL), one of the country’s largest conglomerates, to pay more than MK7bn (about £3m) to the creditors of Peoples Trading Centre (PTC), the retail chain it once wholly owned, after ruling that the group bore direct responsibility for the company’s collapse into insolvency.

In a judgment delivered on Friday at the commercial division of the high court in Blantyre, Justice Masauko Msungama found that PCL had allowed PTC to keep trading for nearly seven years despite knowing the retailer’s liabilities far outstripped its assets, and that the parent company was “directly culpable” for the resulting insolvency.

PTC was placed into liquidation in October 2022, months after PCL sold its entire stake in the retailer to Tafika Holdings.

The court’s provisional liquidator subsequently applied under Malawi’s Insolvency Act to have PCL held liable for creditors’ claims, arguing that the two companies were so closely entangled that PCL should be treated as responsible for PTC’s debts.

The judge rejected claims that the two firms had been run as a single business, finding no evidence that their day-to-day operations had been improperly merged.

But he found PCL had gone well beyond the role of a passive shareholder: senior PCL executives sat on and chaired PTC’s board, PCL supplied PTC’s management under a formal agreement, and the company had repeatedly assured PTC’s creditors and auditors – including through annual “letters of comfort” – that it would stand behind the retailer’s debts.

Court documents showed PTC’s liabilities exceeded its assets in every year from 2015 onwards, worsening from a shortfall of about MK2.3bn in 2015 to nearly MK15.5bn by the end of 2021.

Board minutes cited in the ruling recorded repeated internal warnings about the legal risks of “trading with negative equity”, but PCL representatives on the board were said to have reassured colleagues that, because PCL itself remained solvent, there was “no consequence” to continuing.

The judge said PCL’s failure to properly vet Tafika before selling its stake compounded the problem, leaving PTC’s remaining creditors exposed when the new owner failed to honour commitments to settle outstanding debts.

PCL had argued that its involvement amounted to legitimate shareholder support and that PTC’s board, not PCL, was legally responsible for the company’s affairs.

The company said it had committed more than MK12bn towards settling creditors’ claims before the sale to Tafika and denied acting fraudulently or with the intent to deceive creditors.

The court ultimately ordered PCL to pay MK7,071,493,241, covering unpaid trade debts and staff severance claims outstanding at the time PTC was sold to Tafika, after deducting sums already recovered through the liquidation.

It dismissed the liquidator’s additional claims for interest, currency devaluation losses, exemplary damages and liquidator’s fees, saying these were not justified on the facts.

PCL was also ordered to pay 70% of the liquidator’s legal costs.

PTC, once a household name on Malawi’s high streets, entered liquidation after years of financial distress that saw its retail network shrink and staff go unpaid.

The ruling is likely to be closely watched by other Malawian conglomerates with subsidiaries in financial difficulty, given its emphasis on the point at which shareholder support can tip into legal liability for a subsidiary’s debts.