Question NW2730 to the Minister of Economic Development
10 January 2017 - NW2730
Cardo, Dr MJ to ask the Minister of Economic Development
(1) Whether the Industrial Development Corporation had legal consent from all shareholders to sign off resolutions authorising the share buy-back and reissue scheme affecting a certain company (name furnished) on or around 30 April 2014; if not, why not; if so, what are the relevant details (2) whether he has found that the authorisation of the specified scheme took place in accordance with the Companies Act, Act 71 of 2008; if not, why not; if so, what are the relevant details; (3) why was the valuation of the specified company’s shares as valued by a certain company (name furnished) at the request of business rescue practitioners in July 2013 not used to execute the specified scheme in line with section 48 of the specified Act?;
Reply:
Mr Geoffrey Qhena, the CEO of the Industrial Development Corporation (IDC), has advised that the IDC acted within the law and exercised rights it explicitly had, in respect of decisions relating to the Business Rescue Plan for a company, ODM.
The statement by the IDC CEO on the parliamentary question, follows:
1.“We assume that reference to “the scheme” is referring to the Business Rescue Plan (the Plan) adopted on the 30th of April 2013:
- IDC provided funding to the BEE SPVs namely FNMIH, Red Gold and First Aone to enable them to invest in ODM. IDC funding was secured by, inter alia, cession and pledge of the SPV’s shares and the shares in ODM;
- When ODM was placed in business rescue this amounted to a breach of the IDC funding agreements and entitled the IDC to act to secure its position;
- Accordingly IDC exercised its rights in terms of a cession and pledge of shares thus had the right to vote its shares and those of the SPVs in favour of the plan.
2. It is our view that the authorisation for ODM to be placed in business rescue was done in accordance with the provisions of the Companies Act in that:
- The directors of the company duly placed the company in business rescue in terms of the Companies Act;
- The Plan was published in terms of the Act on 17 April 2013;
- The Plan was adopted by creditors and shareholders of ODM on 30 April 2013 at a meeting convened in terms of the Act.
- 3.We are not aware that the Business Rescue Practitioners had ODM and FNMIH valued in July 2013 or at any other time. If there was indeed any such valuation it was not brought to the attention of the IDC:
- FNMIH shareholders (and not the Business Rescue Practitioner) had a valuation conducted into the value of its shares and those of ODM;
- As stated above IDC exercised its rights against the BEE SPVs (including FNMIH) in terms of the cession and pledge agreements signed by the SPVs in favour of IDC;
- In terms of the cession and pledge the shares were to be independently valued in order to determine the value that IDC will recover via the shares and what would still be due by the SPV’s;
- The value of the shares of ODM and FMNIH was independently determined to be zero as at the date of the company going into business rescue.”
I also draw attention to the reply of the IDC on the turnaround strategy to ensure that the IDC recovers as much of the value of its funding as is possible, as set out in the reply to Parliamentary Question 2660 submitted on 14 December 2016.
Recommended/ Not Recommended
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Mr Malcolm Simpson
Acting Director-General
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Approved/ Not Approved
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Mr Ebrahim Patel
Minister of Economic Development
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