THE High Court judgement which nullified transactions made by three former Renaissance Financial Holdings Limited (RFHL) directors after they were fired in 2012 does not affect the National Social Security Authority (Nssa)’s controlling equity in First Mutual Holdings Ltd (FMHL) as the stake was acquired in 2011 prior to the dismissal of the trio, documents seen by businessdigest this week show.
By Hazel Ndebele
Last week High Court judge Justice Owen Tagu ruled that the RFHL board of Christopher Chetsanga, Collin Kahuni and Monica Mukonoweshuro had been “validly dismissed from their directorship” of RFHL at an extraordinary general meeting (EGM) of January 25, 2012.
Tagu ruled that any business the three had “purportedly undertaken” on behalf of RFHL soon after the EGM was “null and void and of no force and effect”.
Moreover, there have been media reports that Tagu’s ruling effectively reverses Nssa’s acquisition of the FMHL stake. However, documents seen by the businessdigest prove otherwise.
According to the documents, Nssa acquired its direct shareholding in FMHL shares in terms of a composite waiver and settlement agreement entered on December 19 2011, prior to the date which the RFHL directors were dismissed on January 25 2012.
Nssa has a 50,93 % stake in FMHL, followed by Capital Bank Corporation Ltd, which has a 20,08 % shareholding.
Although the fired RFHL directors were part of the signatories when Nssa acquired the direct shareholding in FMHL in 2011, they were not the only ones who signed the deal.
Others who were involved were the Curator of Renaissance Merchant Bank (RMB), RFHL, ReNaissance Investment Banking Corporation Lted (RIBC), Two ReNaissance Securities Pvt Ltd, Econet Wireless (EW) Pvt Ltd, EW Capital Holdings, Nssa and RMB (under curatorship).
While Nssa’s shareholding was acquired in 2011, a notice to stakeholders was published on February 8 2012 summarising the key terms of the Composite Agreement.
The agreement was that: “Nssa shall subscribe for shares in RMB (acquiring an 84% stake) for a consideration of US$24 million payable by a cash injection of US$9,8 million, the conversion into equity of a debt of US$8,5 million and the assumption of a debt of US$5,7 million owed to Econet by RFHL and RMB.”
The composite agreement also stated that: “The shares held by RFHL, RIBC and RS Nominees in Afre be transferred to RMB in settlement of a debt of US$13,3 million owed to RMB by RFHL; that EW Capital sells shares it holds in Afre to Nssa and that the settlement of all the legal disputes between the various parties to the agreement to subscribe for shares and composite waiver and settlement agreement.”
In an interview with businessdigest this week, Nssa board chair Robin Vela said the High Court judgement does not affect Nssa’s acquisition of FMHL.
“There were inaccurate reports that Nssa’s acquisition of FMHL was on the basis of its assumption of a controlling interest in RFHL. In fact, Nssa gained control of FMHL by acquiring EW’s capital shares in FMHL following its rights and underwriting the 2012 rights offer. After the 2012 rights issue, Nssa held 50,93% of FMHL directly and Capital Bank held 20,08%,” Vela said.
“To the best of our knowledge, whether or not the three former RFHL former directors were entitled to undertake any business on behalf of RFHL post-February 26 2012, has no bearing on the sale of shares by EW capital to Nssa,” he emphasised
Vela also said the High Court ruling will not in any way affect the planned takeover of Nicoz Diamond Insurance Ltd by FMHL.
FMHL is set to acquire up to 80,92% of the issued share capital of short-term Nicoz Diamond.
In a circular to shareholders last month, FMHL said it would first acquire 50,89% of Nicoz issued capital from Nssa.
It said Nssa had made an irrevocable undertaking to procure and deliver shares constituting 30,03% shareholding in Nicoz in exchange for 35 291 087 new FMHL shares.
FMHL will make a mandatory offer to the remaining 19,08% Nicoz shareholders after the acquisition of the 80,92%.
FMHL said the proposed transaction was necessitated by that FMHL and Nicoz have a common controlling shareholder — Nssa.
“The proposed acquisition will result in the merged entity enjoying all the benefits of having Nssa as an investor. Nssa will in turn benefit from consolidation of its investments in the short-term insurance sector through portfolio optimisation amongst other benefits,” FMHL said.
FMHL chief executive Douglas Hoto was unavailable for comment.