A HIGHCourt judgement delivered last month ruled that Norman Sachikonye, the former chief executive of First Mutual Ltd (FML), is still entitled to his shareholding in Capital Alliance (CA).
Sachikonye had sought to challenge CA’s decision to dispossess him of his equity on the basis that he had ceased to be a member of the management empowerment vehicle when he resigned as chief executive of FML on June 1, 2004.
The dispute started when Sachikonye left FML in June 2004 after pressure from the Commissioner of Insurance. The Commissioner of Insurance had demanded that Sachikonye resign as the head of FML before it could renew the operating licences of its subsidiaries.
At that time Sachikonye was the major shareholder of CA, a management investment vehicle formed to help executives take up 20% of FML at the time of its demutualisation in 2003.
CA’s 20% translated to 145 320 000 FML shares that had been sold to senior management at demutualisation.
Sachikonye at that time held 26% of CA and was the chairman.
The court heard that on October 26, 2005, Douglas Hoto (second respondent) who had taken over from Sachikonye as the FML chief executive, convened a meeting with other CA members to decide how Sachikonye’s stake could be handled.
The meeting was attended by other CA members who included Noel Biti (10%), Sheila Lorimer (1,20%) and Pelagia Kafesu (12,50%). The three were also cited as respondents in the application. At that time Hoto held 12,50% of CA.
The meeting resolved that the former FML executives who included Sachikonye were no longer eligible to hold shares in CA.
A decision was therefore made to distribute Sachikonye’s 26% stake to other CA members who were still employed by FML in proportion to the existing shareholding.
After the distribution of Sachikonye’s shares Kafesu and Hoto’s shareholding in CA increased to 22,05% making then the majority owners of the investment vehicle. Sachikonye lost his 26% stake. He was not paid for the stake.
The shares of other former FML executives namely Maxwell Bero (1,20%), Simba Dodzo (1,20%), James Jowah (12,50%) and Oliver Kamindimu (2,40%) were also distributed among other CA members.
Sachikonye then challenged the decision to dispossess him of his stake in CA.
In his application to the High Court on January 24, 2006 Sachikonye argued that his resignation from FML did not affect his shareholding in CA.
His lawyer, Addington Chinake of Kantor & Immerman, argued during the court proceedings that Sachikonye had not relinquished his position as director of CA when he left FML in June 2004.
He said Sachikonye remained a shareholder of CA even though he was no longer part of FML.
Hoto and other directors of CA argued that Sachikonye was never a shareholder of CA in his individual capacity. They said he owned a stake in CA through a company called Mellowdew Investment (Pvt).
Justice Anne Gowora who presided over the case however ruled in favour of Sachikonye.
In her judgement Gowora said she relied on the letters and minutes of meetings that CA directors had held when they decided the fate of former executives of FML.
The judge said in all meetings and shareholder’s schedules that were compiled way after his departure from FML, Sachikonye’s name continued to appear prominently as a shareholder of CA.
She said a draft agreement dated September 17, 2004 showed that Sachikonye held 3 900 shares in CA which translated to 26%.
“The document emanating from Capital Alliance however confirmed him as having, almost three months after his resignation, 3 900 shares in Capital Alliance.”
The judge noted that in a letter to Royal Bank, Hoto had himself compiled a list that showed Sachikonye to be a shareholder in CA.
The judge further said the minutes of a meeting that decided the fate of Sachikonye’s shareholding was signed by Hoto as chairman of CA “yet in his opposing affidavit he had the temerity to suggest that the applicant was never a shareholder of Capital”.
“Clearly he (Hoto) was not telling the truth,” Gowora said.
On the counter argument that Sachikonye did not own the shares in his personal capacity the judge said Hoto and other directors were trying to abuse the court process.
Justice Gowora said even though she understood the logic behind the argument that CA shareholders had to be FML employees she was not convinced that Sachikonye was never a member of CA as the respondents argued.
“When one has regard to the attitude that the respondents has adopted, that the applicant never was a shareholder in Capital, it then seems illogical for them to then argue that the applicant lost his shares when he left FML.
“It cannot be possible for one to lose what he never had.”
She said because there was never a clear policy as to what would happen to those CA members that leave FML, the decision to take Sachikonye’s shares was tantamount to appropriation.
Sachikonye was however not granted his application to block the sale of 45,5 million shares that CA members had disposed to pay off debts. Sachikonye wanted to the court to declare the sale of the shares null and void because he had not been consulted when the decision was made.
“The actions of the respondents would only be null and void if they had disposed of the whole or greater part of the assets of Capital Alliance.
“That is not the case in this situation and I find unfortunately that the application for a declarator is not well founded.”
The judgement means that Sachikonye is now the major shareholder in CA. It also means that Sachikonye, Jowa, Dodzo, Kamindimu and Bero now control a combined 43% of CA.