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Which future for confiscated businesses?

Confiscation is the new word that emerged following the flight of ousted President Ben Ali since January 14, 2011. The decision to confiscate could have been the starting point to bring Tunisia to safe heaven through the residues of a corrupt system to the bone. It could have been, as well, a starting point to put this process of democracy on track.

However, this decision has been a hot topic of debate with all the problems faced in the concerned companies. Several issues come already in mind: Which future for the heritage of these confiscated businesses? Will Banks have to respect the moratorium adopted by the Central Bank or will they throw in the logic of recovering their claims during the year 2011? In the event of nationalization, will the state have the resources it needs to manage these companies or will it have to privatize these companies? A number of questions already accumulate. But so far nothing seems clear. The sustainability of the entities and the future of 15,000 direct jobs are threatened.

Walid Jaafar, financial expert: judicial-financial pool, inevitable choice

First, the financial expert took the opportunity to remind of the general framework within which rests confiscation: “the confiscation in my opinion, is in a logic of moral justice.

Those who trampled on the State through corporate bigwigs should take responsibility. However, the challenge rests in the need not to disrupt the economic fabric.” But the problem that is posed today by examining the decree on the confiscation is that we feel we are in a logic of no-going concern or even a logic of pre-liquidation.

Indeed, a careful reading of this decree shows that all companies or individuals with claims against these companies have a period of six months to report on the debt.

However, this kind of measure by analogy can be required only through a logic of management of firms in difficulty or in a situation of liquidation.

“While this is commendable, says Jaafar, I think that the measures put in place, disrupt the management of these companies. Furthermore, they cast doubt unintentionally on the going concern agreement.

Governance remains an obstacle and a problem. For this reason, banks are reluctant in their behavior with these companies. The Central Bank should also clarify its position on the refinancing of mortgages held by banks on these companies. They are not certainly short-term receivables as defined in the Circular 91-24, which would cause problems for their eligibility for refinancing.

Some synchronization should be made between the various bodies that are responsible for the issue of confiscated businesses. The clarification is necessary both for the governance structure and the prospects of confiscation measures. In this regard, Walid Jaafar called on the receivers of these companies to develop a business plan over five years to explain the financial prospects of these companies. This would have some credibility and above all an economic argument for financial institutions. It is also reassuring for partners. This business plan deserves to be approved so that it would be achievable in partnership with experts of the profession.

On the other hand, it is important to draw attention to the possibility of the existence of an antagonism between the confiscation measures and measures of the Central Bank aimed to support businesses that suffered damage and losses during the critical period of the Revolution.

Will the Tunisian banks grant moratoriums to confiscated businesses which had suffered damage and have them benefit from rescheduling, while their special status casts doubt on their prospects? “To save the economic entities belonging to the former ruling family and keep their sustainability while rehabilitating the rights of the State and other possible victims of the institutionalized predation, our interviewee suggests the establishment of a legal-financial pool well-endowed with resources and skills. This could, in a shortened time, clarify the issues and remove shadows on questionable financial arrangements to arrive at reasoned legal decisions.”

Hk, receiver: the nationalization of these businesses is a step backward

But until the situation becomes clearer, the status of these companies deteriorates, Hk, receiver, anticipates. These companies saw their value falls, they are short of cash, their future is still unclear … the situation is still critical … Some businessmen are afraid to be on the list, even banks do not want to cooperate.”Banks now want to limit the damage. Some companies may be aware that much of their commitments will not be honored especially as most companies have no business assets,” he warns. Therefore, Hk called on the Interim Government to take immediate action to avoid the worst especially with a law that leaves open the list and where the receivers are between a rock and a hard place.

Our interlocutor has some suggestions. They include speeding up the implementation of a comprehensive program for management and restructuring of businesses to ensure sustainability and preserve the rights and achievements of employees and creditors.

He also recommended bringing all these companies together in a Holding and considering the opportunity to list companies with a good and sound financial base on the stock market. He added that the nationalization is a step backward for a country like Tunisia, which chose the opening of the market while emphasizing the need for quick decisions since many of these companies are on the verge of bankruptcy. It is therefore clear that it is essential to carefully consider this thorny issue.

Mohamed Adel Ben Ismail, Chairman of the Committee on Confiscation

Adel Ben Ismail made the distinction between freezing as a preventive and protective measure and confiscation which would be made by judicial decision in a court where anyone can defend himself. “The operations of confiscation will be conducted on the basis of records and solid and legal evidence,” he said.

Ben Ismail pointed out that some of these companies are facing financial difficulties. He stressed, in this context, the concern of the Committee to create best conditions to overcome the challenges faced by businesses. In this context, the Committee on Confiscation is examining all legal and economic records of these businesses.

So far, the Committee has transferred 120 properties with land titles. Efforts are stepped up to prepare another list that includes one hundred properties.

For companies, the Committee is preparing the decisions of transfer of ownership of shares or shares allocated to the State. According to the chairman of the committee, 30 companies will soon be transferred to state ownership while preserving the rights of creditors.

To overcome this situation, two scenarios have been proposed: either to privatize them or attach them to existing companies or groups, announced Mr. Ben Ismail.

In any case and whatever the fate of companies which are being confiscated, what is important now is the very survival of these productive entities. Experts will undertake to preserve jobs and protect creditors.

An appeal is also addressed to the Tunisian Professional Association of Banks and Financial Institutions to regularize the situation especially since some members of the Tunisian banking pool are involved in the credit arrangements by being part of the business galaxy of the Ben Ali-Trabelsi clan.

No need to wait for justice that could take too much time to find the solution. A common response from all stakeholders by developing a strategy, as soon as possible, remains a strategic choice for the management and structuring of companies on a case by case basis especially as their management has become a nightmare for administrators.

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