THE Zimbabwe Stock Exchange (ZSE) has climbed down on an order to Econet Wireless to reconvene its extraordinary general meeting and has now suggested that the company and its shareholders address issues arising from the EGM.
On Tuesday last week, Econet wrote to the ZSE responding to the ZSEâ€™s bid to nullify results of the EGM held on March 27.
The ZSE had written to Econet ordering the mobile phone operator to re-convene the EGM, but Econet immediately wrote to the exchange â€œremindingâ€ it that it had no legal authority to make such an order.
At the centre of Econetâ€™s objection was that the ZSE had no powers to nullify the results of an EGM of a listed company and its order to Econet was a â€œnullityâ€ because it violated the exchangeâ€™s own listing rules.
According to ZSE sources, Econet also said the exchange had made a unilateral decision without even giving the companyâ€™s chairman and chief executive the chance to give its own version of events surrounding the EGM.
â€œThe extent of the confusion, inaccuracy and lack of substance makes your decision irrational and, or grossly unreasonable and thus liable to be set aside on that basis,â€ according to a letter dated April 15 sent to the ZSE by Econet lawyers.
Econet was also concerned that one of the letters the exchange had sent to Econet appeared to be similar, almost to the word, to another letter written to Econet chairman Tawanda Nyambirai by lawyers representing Old Mutual Asset Managers.
Econet said it was this reliance on representations made by one party to the EGM issue without giving Econet the chance to comment that proved the ZSEâ€™s actions.
A letter seen by businessdigest to ZSE from Econet lawyers read: â€œIn the circumstances, be advised that our client shall not only disregard your decision, but shall also apply to court to have the decision formally set aside. Â
â€œIt is also our instructions to sue the stock exchange and members of the Listing Committee in their personal capacities as it is our clientâ€™s view that by coming up with such a decision, members of the Commission exceeded their mandate.Â We say so because no quasi judicial body like yours acting carefully on what was before it would have come to that conclusion.â€
Market analysts this week questioned the corporate governance system at Econet. Nyambirai chaired an EGM on a matter that he was the legal advisor for through Nyambirai & Mtetwa where he is a partner and financial advisor through his company TNFS.
â€œThat is village business ethics, similar to running a company like your motherâ€™s rural tuckshop. It is clear that an asset manager has a mandate from an investor to manage assets as he deems professionally fit and Old Mutual can vote on the assets that it manages. That is common sense,â€ an analyst with a commercial banks said.
Market analysts also said it was â€œinterestingâ€ to note that Delloitte has been auditing Econet for the past 11 year.
â€œThere is clear collusion that happens when auditors work with a client for that long. Look at the collapse of Anderson in the Enron and WorldCom case. Econet once said its policy was to change auditors after every eight years but that has not happened,â€ an auditor told businessdigest yesterday.
â€œIn a much as these there has been bad blood between these two companies (Old Mutual and Econet) why is it that there is trouble where ever there is Econet,â€ questioned an economist with a commercial bank.
Shareholders of Econet on March 27 authorised a US$93,9 million funding package from South African-based Econet Wireless Group (EWG), Econet Wireless Holdingsâ€™ (EWH) largest shareholder.
The traditionally short EGM turned into a marathon that lasted until 7pm after Old Mutual and a group of foreign shareholders demanded a secret poll based on the number of shares held by each member present.
The shareholders also raised conflict of interest issues relating to chairman Nyambiraiâ€™s role in the transaction. Nyambirai will step down at the next AGM.
With EWG and TSMI, who between them have more than 50%, unable to vote because of conflict of interest provisions, Old Mutual had hoped that its own shareholding of about 12%, and that of the other allied shareholders, would be enough to vote down the deal.
After the poll had been conducted, the vote in favour of the transaction was still much greater than that mustered by Old Mutual and its supporters.
Controversy erupted after Nyambirai said Old Mutual was not eligible to vote, because it had emerged that some of the institutions and investors they claimed to represent as an asset manager had not given them authority to vote on their behalf.
BY PAUL NYAKAZEYA