Shares in Steinhoff fell by nearly 40% on Monday afternoon after the Western Cape High Court ruled that it has jurisdiction to hear a liquidation bid against the retailer.

By 15:50 Steinhoff shares had recovered to trade 16% down on the day at R3.09.

In oral arguments last week, Steinhoff maintained that it cannot face a liquidation hearing in a South African court as its parent company was incorporated in the Netherlands.

The group has also denied that it is commercially insolvent. 

On Monday Judge Hayley Slingers dismissed the argument that the court does not have jurisdiction to wind up the respondent. She did not provide reasons. She also dismissed two intervention applications.

In the wake of the ruling, the liquidation case will likely get underway on Thursday. 

Tekkie Town 

The liquidation bid was brought against the retailer by the former owners of shoe retailer Tekkie Town, who claim they were “duped’ into swapping their shares for Steinhoff stock.

While Steinhoff argued that under the 2008 Companies Act it should be classed as an “external company”, lawyers for Tekkie Town contended that winding up proceedings are still governed by an earlier version of the act, which makes provision for external companies to be wound up.