Business / Companies
ReNaissance goes to court over SEC order
16 Aug 2013 at 07:40hrs | Views
TROUBLED brokerage firm, ReNaissance Securities (RenSec), is seeking the High Court's intervention to reverse an order by the Securities Commission of Zimbabwe (Sec) forcing the company to stop the disposal of US$800 000 worth of shares in its nominee account on grounds the ownership of the shares is in dispute.
According to High Court documents gleaned by businessdigest, RenSec liquidator Phibion Gwatidzo made a July 30 urgent chamber application seeking the High Court's protection after Sec's directive to stop First Transfer Secretaries (FTS) and Mast Stockbrokers (Mast) from selling or registering shares they had acquired from RenSec.
FTS and Mast were the first and second respondents while Sec and the Master of High Court were the third and fourth respondents respectively.
Gwatidzo is said to have instructed Mast to sell some of RenSec's shares worth US$308 687 during the period between June 27 and July 9 2013.
Mast also sold another batch of shares worth US$434 176 during the period June 28 to July 22 2013 which are yet to be paid for.
Mast then instructed FTS, the transfer secretaries responsible for those shares, to register them in the name of the buyers.
However, Sec instructed Mast to stop selling any of the RenSec shares and reverse any such sales that had been made and cancel the registrations.
Pursuant to Sec directive, Mast is demanding to be reimbursed US$308 687 that was received by Gwatidzo for the first batch of shares unless Sec allows registration of those shares.
Some of the buyers for the first batch of shares include Econet, Aico, Old Mutual, CBZ, Meikles, Delta, AFre, OK, Innscor and Delta.
Gwatidzo's lawyers, Mundia & Mudhara Legal Practioners, argued Sec's directive was unlawful and had already caused continuing harm to RenSec's liquidation process.
"Applicant accordingly seeks an order declaring third respondents' directive unlawful, void and of no force and confirming that FTS can sell and register the shares of RenSec without approval or authorisation of third respondent," reads part of Gwatidzo's application.
Gwatidzo argued once a company is in liquidation only two authorities can make decisions in relation thereto, namely the liquidator and the Master of the High Court, adding any third party seeking to interfere with the duties of the liquidator regarding assets or disputed assets should seek the permission of the court.
"The third respondent is a creature of statute and can only exercise the powers and functions and objectives assigned to it by the constituting statute. In this matter third respondent is seeking to exercise powers that are outside of the Securities Act in particular section 4 and the First Schedule thereof. It is clear that third respondent does not have power to give directives relating to the registration of a specified set of shares," Gwatidzo submitted.
"Through its directive to the first and second respondents, the third respondent has caused serious irreparable harm to the interest of creditors and to me as liquidator. The third parties who bought the company's shares are understandably alarmed at this turn of events, unless the court intervenes, the liquidation process will be completely frustrated. As liquidator, I have concluded legally binding contracts with third parties and run the very great risk of being sued by them for their imminent losses arising from the third respondent's directive."
Sec CEO Tafadzwa Chinamo however argued Gwatidzo's application was not urgent, saying there was need to fully examine the legality of the applicant's contracts with the third parties and that the shares in question were not owned by RenSec.
Former RenSec broker Bart Mswaka said the shares in question were not owned by the stockbroker as it had no assets at the time he resigned in 2012. He said the company even failed to pay US$150 000 licence fees to remain operational.
"The US$800 000 since realised by the applicant from the shares held in the nominee account does not belong to the company as the company does not, and has never, owned those shares," said Mswaka in his supporting affidavit.
Mswaka said there was no time limit for the client's claims and that if the rightful owners of the shares were duped; they would look to Sec for compensation.
In that regard, Chinamo argued the shares should not be disposed of as long as there was doubt over ownership of the shares as it could prejudice real owners of the shares.
He said the shares in question were held by the broker in a nominee account, meaning they were not owned by the broker but only held by the broker in trust for an undisclosed investor hence Sec cannot allow the sale of shares whose ownership is in doubt for the benefit of a licensed broker.
"Applicant has not proven that the company in liquidation held its own shares in a nominee account, nor has he taken full steps to ascertain the ownership of those shares. His hurry to sell those shares raises suspicion. The reason the company was placed into liquidation and appointed applicant liquidator is the company had no assets and could not raise even US$150 000 to retain its license," read part of Chinamo's affidavit.
"How then, can the company suddenly be said to own shares worth US$800 000? In that event, the company should be removed from liquidation and allowed to continue trading."
Chinamo said Gwatidzo, who is yet to identify real owners of the shares, can only dispose of assets of the company in liquidation and not assets held by the company in liquidation for investors.
Contrary to Gwatidzo's claims that Sec is acting outside its mandate, Chinamo said the regulator was not out of line, adding while the liquidator and the Master of High Court can make decisions regarding assets of the company in liquidation, they cannot make decisions regarding assets belonging to investors and were in the custody of the company in liquidation.
RenSec, a part of businessman Patterson Timba's financial services empire housed under his Renaissance Financial Holdings Limited (RFHL) which crumbled following shareholder's abuse of depositors' funds, was in 2011 suspended from conducting dealing business after an inspection that revealed gross undercapitalisation and failure to submit a concrete recapitalisation plan.
In July 2011 Sec lifted the ban after proposals were made by RenSec but under strict supervision. In April 2012, RenSec was again suspended after failing to address capitalisation challenges.
According to High Court documents gleaned by businessdigest, RenSec liquidator Phibion Gwatidzo made a July 30 urgent chamber application seeking the High Court's protection after Sec's directive to stop First Transfer Secretaries (FTS) and Mast Stockbrokers (Mast) from selling or registering shares they had acquired from RenSec.
FTS and Mast were the first and second respondents while Sec and the Master of High Court were the third and fourth respondents respectively.
Gwatidzo is said to have instructed Mast to sell some of RenSec's shares worth US$308 687 during the period between June 27 and July 9 2013.
Mast also sold another batch of shares worth US$434 176 during the period June 28 to July 22 2013 which are yet to be paid for.
Mast then instructed FTS, the transfer secretaries responsible for those shares, to register them in the name of the buyers.
However, Sec instructed Mast to stop selling any of the RenSec shares and reverse any such sales that had been made and cancel the registrations.
Pursuant to Sec directive, Mast is demanding to be reimbursed US$308 687 that was received by Gwatidzo for the first batch of shares unless Sec allows registration of those shares.
Some of the buyers for the first batch of shares include Econet, Aico, Old Mutual, CBZ, Meikles, Delta, AFre, OK, Innscor and Delta.
Gwatidzo's lawyers, Mundia & Mudhara Legal Practioners, argued Sec's directive was unlawful and had already caused continuing harm to RenSec's liquidation process.
"Applicant accordingly seeks an order declaring third respondents' directive unlawful, void and of no force and confirming that FTS can sell and register the shares of RenSec without approval or authorisation of third respondent," reads part of Gwatidzo's application.
Gwatidzo argued once a company is in liquidation only two authorities can make decisions in relation thereto, namely the liquidator and the Master of the High Court, adding any third party seeking to interfere with the duties of the liquidator regarding assets or disputed assets should seek the permission of the court.
"The third respondent is a creature of statute and can only exercise the powers and functions and objectives assigned to it by the constituting statute. In this matter third respondent is seeking to exercise powers that are outside of the Securities Act in particular section 4 and the First Schedule thereof. It is clear that third respondent does not have power to give directives relating to the registration of a specified set of shares," Gwatidzo submitted.
Sec CEO Tafadzwa Chinamo however argued Gwatidzo's application was not urgent, saying there was need to fully examine the legality of the applicant's contracts with the third parties and that the shares in question were not owned by RenSec.
Former RenSec broker Bart Mswaka said the shares in question were not owned by the stockbroker as it had no assets at the time he resigned in 2012. He said the company even failed to pay US$150 000 licence fees to remain operational.
"The US$800 000 since realised by the applicant from the shares held in the nominee account does not belong to the company as the company does not, and has never, owned those shares," said Mswaka in his supporting affidavit.
Mswaka said there was no time limit for the client's claims and that if the rightful owners of the shares were duped; they would look to Sec for compensation.
In that regard, Chinamo argued the shares should not be disposed of as long as there was doubt over ownership of the shares as it could prejudice real owners of the shares.
He said the shares in question were held by the broker in a nominee account, meaning they were not owned by the broker but only held by the broker in trust for an undisclosed investor hence Sec cannot allow the sale of shares whose ownership is in doubt for the benefit of a licensed broker.
"Applicant has not proven that the company in liquidation held its own shares in a nominee account, nor has he taken full steps to ascertain the ownership of those shares. His hurry to sell those shares raises suspicion. The reason the company was placed into liquidation and appointed applicant liquidator is the company had no assets and could not raise even US$150 000 to retain its license," read part of Chinamo's affidavit.
"How then, can the company suddenly be said to own shares worth US$800 000? In that event, the company should be removed from liquidation and allowed to continue trading."
Chinamo said Gwatidzo, who is yet to identify real owners of the shares, can only dispose of assets of the company in liquidation and not assets held by the company in liquidation for investors.
Contrary to Gwatidzo's claims that Sec is acting outside its mandate, Chinamo said the regulator was not out of line, adding while the liquidator and the Master of High Court can make decisions regarding assets of the company in liquidation, they cannot make decisions regarding assets belonging to investors and were in the custody of the company in liquidation.
RenSec, a part of businessman Patterson Timba's financial services empire housed under his Renaissance Financial Holdings Limited (RFHL) which crumbled following shareholder's abuse of depositors' funds, was in 2011 suspended from conducting dealing business after an inspection that revealed gross undercapitalisation and failure to submit a concrete recapitalisation plan.
In July 2011 Sec lifted the ban after proposals were made by RenSec but under strict supervision. In April 2012, RenSec was again suspended after failing to address capitalisation challenges.
Source - businessdigest
