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THE Joint Consultative Council on the Construction Industry (JCC) says it is alarmed at the manner in which the Government has chosen to deal with the winding up of the Education Facilities Company Ltd.
It says it now appears the Government intends to wind up the company instead of dealing with its debts to legitimate creditors.
In a statement on Tuesday, the JCC says the EFCL owes “well over $600 million” to its creditors of which the majority represents money owed to contractors and consultants going as far back as 2015.
Last month, Newsday reported on Government’s plans for EFCL’s future with a winding-up petition being filed in the High Court. No date has yet been set for the hearing of the petition nor has it been published to give notice to the company’s creditors of the proposed position. So far, neither Ministers of Finance Colm Imbert nor Brian Manning has responded to questions on the winding up of the EFCL.
In its statement, the JCC said the EFCL, acting on behalf of the Ministry of Education, engaged private companies to provide goods and services “for which they did not have the funds set aside.”
“ The financial hardship imposed on companies by this refusal of the MOE/EFCL to pay legitimate debts after carrying out their own several due diligence audits, and even after lawful judgments, since 2016, has forced some private companies to downsize and others to simply fold up.”
The Finance Ministry has said the matter “was now before the court and a liquidator appointed by the court will be charged with the responsibility of asking creditors to prove their claims and adjudicate on them.
“It is only when that stage is reached that the Government can give consideration to such matters.”
The JCC said “the fact remains that while many contractors and others have already sought and secured judgment against the EFCL in the courts, some with lower value judgments have chosen to levy on the EFCL assets, which are virtually nil and were left trying to liquidate furniture.
“The government is repeatedly on record, promising that all legitimate debts incurred by the EFCL will be paid. It appears, however, that the Government holds themselves above the law and is using the Companies Act to sidestep its responsibility to pay the legitimate debt.”
The JCC said the EFCL was created by the Government, and funded by the Government to satisfy the need for works and services of the Ministry of Education.
“In a liquidation scenario, where the assets of a state-sponsored company like the EFCL cannot cover such enormous debts, payment can be made at a discounted rate by the liquidator as he has to pay off all others as well as creditors based on the EFCL’s asset value.”
The JCC says it appears that the Government has taken a decision to wind up the company instead of dealing with legitimate debts ordered by the courts and other creditors over the past six years.
“This is an extremely dangerous precedent to set in a country where we have over 50 special purpose companies, like the EFCL, all of whom have had a track record over the years of not paying contractors; forcing them to go to the courts and/or paying them very late with persistent impunity.
“It is also instructive to note that our recently minted procurement legislation does not contain penalties for state entities that will continue to issue contracts to private companies without secure funding and adequate cash flow arrangements. “
The JCC said the construction industry may “now have to lobby for amendments to the procurement legislation to make this unfair practice by the Government punishable.”
“The JCC nevertheless appeals to the Government to commit and set aside the full sum that is legitimately owed to be paid, when they do 'give consideration' to what the liquidator has determined to be, the total debt owed to the EFCL's creditors.”
Notice of the decision to wind up the company came in termination letters to staff last month by acting chairman of the EFCL, Savitree Seepersad, a deputy permanent secretary in the Ministry of Finance.
Over 60 former employees were told the company was “unable to carry on the business for which it was established and has decided to close down its undertaking and go out of business.”
These workers are being represented by the Communication Workers Union.
The EFCL was established as a special-purpose state enterprise on March 11, 2005, under the Patrick Manning administration. The company's functions involved repairing and maintaining early childhood education centres, primary and secondary schools. It also had responsibility for the Education Ministry’s textbook rental programme.
Since its establishment in 2005, a total of 133 new school facilities had been constructed and outfitted. These include 85 ECCE centres, 40 primary and eight secondary schools. Over the same period, EFCL has done over 8,000 repairs and maintenance jobs.
Most recently, it has been unable to pay staff and has had millions of dollars in judgment debts registered against it.
This was alluded to by Seepersad in the letter. She admitted the company has, for some time now, been unable to meet monthly operational expenses, including the payment of salaries to employees and pay its debts.
She also said it has also been “inundated with litigation which has caused an additional strain on its resources and frozen its bank accounts.”
The termination notice also said steps have been taken to wind up the company.
After experiencing trouble to balance its accounts, the EFCL was placed under the “direct management” of the Finance Ministry.
Since 2018, the National Maintenance Training and Security Company Ltd (MTS) had taken over the school repair projects for her ministry.
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