Wrap Text
CAP - Cape Empowerment Limited - Voluntary announcement of corporate action
relating to Cape Empowerment`s investment in Command Holdings Limited
("Command")
CAPE EMPOWERMENT LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/001807/06)
JSE Code CAP
ISIN ZAE000145066
("Cape Empowerment" and "the company")
VOLUNTARY ANNOUNCEMENT OF CORPORATE ACTION RELATING TO CAPE EMPOWERMENT`S
INVESTMENT IN COMMAND HOLDINGS LIMITED ("Command")
1. INTRODUCTION
Shareholders of Cape Empowerment are referred to the SENS announcement
published by Command on 11 April 2011 and the circular it posted to its
shareholders dated 11 April 2011 to convene a general meeting of
shareholders in terms of section 181 of the Companies Act 1973 (Act 61 of
1973) ("the Act"). The general meeting of Command shareholders is to be
held on 9 May 2011 at the request of Cape Empowerment Trust Limited (a
subsidiary of Cape Empowerment) and other Command minority shareholders
to consider, and if deemed fit, to approve resolutions for the removal of
Prof. MI Parker, Mr KG Druker, Ms FN Moshesh and Mr CT Vermaak and the
appointment of Messrs. J de Villiers, M Sonik, TD Rai and M Burton as
directors of Command.
The rationale for Cape Empowerment`s actions is set out below.
2. BACKGROUND
Command is a security solutions group, which is listed on the JSE Limited
("JSE"). According to its 2009 annual report (dated 29 November 2010)
("the 2009 Annual Report") its major subsidiaries include Command
Security Services (Proprietary) Limited, Command Protection Services
(Proprietary) Limited, and Comwezi Security Services (Proprietary)
Limited ("Comwezi").
Trading in Command`s shares was suspended by the JSE on or about 30 June
2010 and remains suspended, presumably due to a number of corporate
governance irregularities, as set out in further detail below.
On 8 February 2011 Command published an announcement on SENS withdrawing
the 2009 Annual Report, citing the fact that the report included an
unsigned audit report and therefore had not been signed off by the
auditors. This, along with the other instances of governance failure set
out below, has led to the section 181 requisition and proposed changes to
the board of Command.
3. RATIONALE FOR THE SECTION 181 REQUISITION
Shareholders should take note of the following facts:
3.1 Annual General Meetings ("AGM")
Command last held an AGM on 22 January 2009, dealing with the Annual
Report for the year ended 30 June 2008. No further AGM`s have been
held. The 2009 Annual Report, now withdrawn, did contain a notice
of AGM set for Tuesday, 21 December 2010, however Command announced
on SENS on 17 December 2010 that it had been postponed to 29 March
2011 without supplying reasons for such postponement. Command has
not held an AGM or any shareholder meeting in more than two years.
This is a contravention of s.179(1) of the Act, which requires a
company to hold regular AGM`s.
3.2 Appointment of directors
The current board of directors of Command ("the board"), with the
exception of Mr C T Vermaak, have been members of the board at least
since 2002. In terms of article 53 of Command`s articles of
association ("articles") the term of appointment of directors
automatically expires in respect of one third of all directors, as
well as any director that held office for longer than three years,
after 3 years. This is a typical requirement of the articles of
listed companies and is not unique to Command.
It is customary for directors who automatically retire in terms of
the articles, to offer themselves for re-election to the board at
the next AGM, failing which, such directors vacate their offices
automatically.
As a result of the above, the current board members of Command
should have been re-elected at some stage during the last 5 years.
However, from Command`s notices of AGM for the AGM`s held on 19
January 2005, 24 November 2005, 5 December 2006, 4 December 2007,
and 22 January 2009 it appears that in each case only the same two
directors, Mr Z J Sithole and M I Parker, were re-elected to the
board and no one else. It would appear that the current board
members are not duly appointed in terms of Commands articles. Under
the circumstances and given that the articles require a minimum of 4
duly appointed directors at all times, the board is currently
operating with limited authority. A shareholders` meeting is
therefore required to regularise the appointments to the board of
directors of Command.
3.3 Related parties
A review of the Annual Reports of the Command for 2005, 2006, 2007,
2008 and 2009 ("the annual reports") indicates that Command owns a
30% interest in Comwezi. However, very little information is
provided about Comwezi, its operations, infrastructure, and
management, despite the fact that the growth in Comwezi`s business
over this period outstripped any growth in Command`s business and
that, by 2009, it appears that the bulk of Command`s earnings are
generated from its investment in Comwezi. The annual reports do not
disclose that the Grapsy Trust, Mr M S Mowzer`s family trust of
which he is the sole trustee, owns 60% of Comwezi. The fact that
the Grapsy Trust is the 60% (sixty percent) shareholder of Comwezi
was publicly disclosed for the first time in a SENS announcement on
23 December 2010. Insufficient disclosure and management by the
board of the conflict of interest evidences poor corporate
governance.
3.4 Financial Reporting
The timing and quality of financial reporting by Command is
inadequate in the following respects:
3.4.1 In 2009 Command changed its year-end from June to December. Its
Annual Report for 2009 was therefore due by 30 June 2010. In
July, the JSE suspended trade in the Command`s shares. On 29
November 2010, Command published its 2009 Annual Report but it
was withdrawn for the reasons set out in paragraph 3.4.2 below,
resulting therein that Command has not published an Annual
Report since 28 November 2008 (for the year ended 30 June 2008)
more than 26 months ago.
3.4.2 On 8 February 2011 Command withdrew the 2009 Annual Report,
stating that it has not been signed off by the auditors, SAB&T,
despite the inclusion of an audit report by the auditors,
albeit unsigned, in the annual report.
3.4.3 The 2008 Annual Report indicated the auditors of Command as a
firm called TCG (Alberton). The audit report included was
unsigned as were those of 2007 and 2006, by the same firm. The
last signed audit report, by auditors Ramathe Inc., appeared in
the 2005 Annual Report, dated 6 October 2005. No directors`
signatures appear on any of the Annual Reports since 2005.
3.4.4 At the AGM of 22 January 2009 certain minority shareholders,
including Cape Empowerment Trust Limited and Leadenhall
Nominees Limited, voted against the approval of the 2008 Annual
Report, the re-election of the two directors (as set out in
paragraph 3.2 above), certain board authorities, and the
appointment of TCG (Alberton) as the auditors for the following
year. Despite the objections above and due to a technicality
regarding the authorisation documents of one of the
shareholders represented at the meeting (which remains in
dispute) these resolutions were passed.
3.4.5 As a result thereof that no further AGM`s were held by Command
it is unlikely that SAB&T has been validly appointed in terms
of sections 270 and 278 of the Act as auditors to Command. The
2009 Annual Report (withdrawn) indicates total audit fees for
the Command group of only R45 000, which is not commensurate
with an effective audit for a group purporting to generate
turnover of R243 million.
3.4.6 The Annual Reports since 2005 reveal substantial non-compliance
with IFRS and the JSE Listings Requirements. Areas of non-
compliance include:
3.4.6.1 the Corporate Governance reports and directors` reports;
3.4.6.2 the lack of transparency relating to Comwezi (refer paragraph
3.3 above), in terms of the management of Comwezi, transfer
pricing and shared services and infrastructure;
3.4.6.3 the accounting treatment of Comwezi. Command, a 30%
shareholder in Comwezi, consolidates Comwezi as a subsidiary,
however no minority interests in equity or earnings are
disclosed, despite the stated accounting policies;
3.4.6.4 various compulsory aspects of annual financial statements as
required by IFRS are either not included, or are included, but
no audit opinion is expressed thereon;
3.4.6.5 material increases in various balance sheet items, such as
goodwill and investments and loans, are not explained;
3.4.6.6 material charges to the income statement, typically classified
as "Other items", are not explained;
3.4.6.7 grammatical, referencing and technical errors persist from year
to year.
Cape Town
4 May 2011
Date: 04/05/2011 17:13:01 Supplied by www.sharenet.co.za
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