OUTSPOKEN British investor Nicholas van Hoogstraten this week temporarily brought proceedings at a Rainbow Tourism Group (RTG) annual general meeting to a halt, saying directors of the group were conflicted in the National Social Security Authority (Nssa) US$10 million loan rescheduling deal. He also charged they were attempting to sneak the issue through the back door.
By Taurai Mangudhla
Van Hoogstraten was seeking to block three motions from sailing through as soon as the meeting opened.
The motions related to the adoption of financial accounts which were joined to the restructuring of a US$10 million loan facility by the hotel group’s largest shareholders, Nssa. They also regarded approval of the remuneration and re-appointment of Grant Thornton Chartered Accountants Zimbabwe Camelsa as auditors for the current financial year.
Van Hoogstraten described RTG chairman John Chikura’s attempt to cause the meeting to adopt financial accounts together with term sheets for the company’s Nssa loan without prior communication as illegal.
The loan was at 10% interest rate per annum and was due December month-end last year. It has been restructured to a seven-year tenure at 6% interest per annum.
Before Chikura put the first motion to adopt financial statements and term sheets — which outlines terms and conditions of a business agreement — to vote, Van Hoogstraten abruptly interjected: “The so-called restructuring approval is illegal at this stage. It has to be presented to shareholders before the AGM and it has to exclude Nssa who provided the loan and (First Mutual Limited) FML, who basically are a subsidiary of Nssa. They are conflicted.”
Chikura attempted to quash the brewing chaos by winning the hearts of shareholders through an explanation that rang of justification.
“This loan fell due in December 2015 and Nssa could have called their loan which would have bankrupted the entity or put the group under liquidation. Nssa is right now held as a creditor at bay, they are not going to take that move to bankrupt the organisation. As a board, we have taken this position and we are confident the company will succeed,” Chikura explained.
Van Hoogstraten was steadfast, insisting the proposals must have been put to shareholders first ahead of the meeting, adding the board, which comprises representatives of Nssa and FML, is conflicted.
“A thousand of other shareholders are not here and the so-called loan keeps on increasing,” said Van Hoogstraten.
Chikura said the first loan was US$10 million, but another US$3,6 million was given to buy furniture and fittings for the now closed Beitbridge hotel. He shrugged off accusations of conflict, saying all members had a fiduciary duty to have the interest of the entity at heart, before roping in company legal advisor Vulindlela Sibanda of Mawere and Sibanda Commercial Lawyers to offer a legal opinion on whether the contentious motions were porous at law.
“As of 31 December 2015 the Nssa loan fell due, so Nssa could call the loan. Everyone who is a shareholder knows the company does not have US$10 million to pay Nssa. There were then negotiations between Nssa and RTG and there was an agreement that Nssa was willing to restructure our loan on the terms that the chairman has explained. The issue which is being raised is that there is a conflict of interest because those terms which were agreed by an RTG board that has Nssa representatives,” Sibanda said.
“If your sole interest is that of an officer in the related party that you are transacting with, you are in terms of the law allowed to vote. Where you are not allowed to vote is if you, as an individual, have a direct or indirect financial interest and according to my instructions, none of the directors that are seconded by Nssa to RTG have a direct or indirect financial interest in the transaction; that is what the Articles of Association and the Companies Act says. If your only interest is being an officer of a related party, you are not conflicted and you are allowed to vote.”
Sibanda said the term sheet needs to be approved by the shareholders in an extraordinary general meeting (EGM) as well as clearance from the Zimbabwe Stock Exchange.
“So the term sheet is subject to those two regulatory issues and it says that. As we stand today, in terms of breach or legality, the term sheet is not illegal because it has not yet been finalised because it is still subject to review,” Sibanda added.
To which Van Hoogstraten exclaimed: “The point I am making is that shareholders have been misled. There is nothing in this report of this and there is no EGM.”
After his remarks, Sibanda had to walk up to the podium and guide Chikura in order to contain the businessman.
Van Hoogstraten proved to be a hard nut to crack, proceeding to tell the meeting he had seen term sheets for the initial proposal to restructure the loan mid-2015 and had shared his reservations. The new proposal, he said, was never communicated to him.
Chikura, however, stuck to his guns and escalated the debate to a more personal level.
“As far as the board is concerned, we approved it and before I ask members to vote I would like to ask Van Hoogstraten what alternatives he has to address this?,” said Chikura.
The RTG chairman’s move apparently flustered Van Hoogstraten who responded: “The whole background of this loan and Nssa’s involvement in this company is a far bigger issue that I am not going to get into … we should not be washing our dirty linen in public.
“You want me to keep me quiet. I am never going to keep quiet when some dirty nonsense is going on,” added Van Hoogstraten eventually forcing the meeting into poll votes on the three contentious issues.
The motions were, however, carried despite resistance from about 35% of the votes.
In a trading update for the first four months of the year to April, CE Tendai Madziwanyika said the group’s revenues grew 13% to US$8,6 million compared to US$7,6 million in the same period in the prior year while occupancies grew to 48% from 38% prior year.
Madziwanyika said furniture from the closed Beitbridge hotel would be distributed to the group’s hotels across the country.