A consortium of shareholders in one of the companies looted by slain mining magnate Brett Kebble has launched a multimillion-rand lawsuit against Investec Bank.
The shareholders, who hold a minority stake in Randgold & Exploration, argue that agreements concluded between Randgold and JCI — Kebble’s other former company — and Investec are “unfairly prejudicial” and “unjust”.
They are requesting that the court order Investec to pay them out for their shares in Randgold at R288 a share, more than 10 times the roughly R20 a share assigned by the agreements reached in January 2010.
It is not clear how many shares are represented by the consortium, but a successful challenge would set a precedent for other shareholders, meaning a potential liability running into billions of rands.
Investec has said the matter is sub judice, while adding that the claim “is completely unfounded” and will be vigorously defended.
The 2010 agreements were reached in settlement of claims between the two companies arising mainly out of the period when Kebble exercised effective control over both JCI and Randgold.
The basis of the Randgold claim against JCI was that Kebble fraudulently sold off assets belonging to Randgold and secretly used the proceeds to prop up JCI, his flagship company.
At one point Randgold’s claim against JCI amounted to about R5-billion, more than double the estimated value of the wrecked shell of JCI.
The settlement resulted in Randgold receiving compensation from JCI worth about R900-million.
The final agreement was controversial in that Investec took over effective control of both the companies when Kebble was ousted in August 2005 and, shortly before that, concluded a highly contested loan agreement to pump money into JCI.
Minority shareholders argued that Investec and its nominated directors on both JCI and Randgold were conflicted in relation to both the inter-company claims and the loan agreement. The settlements, they claimed, were self-serving and not in the best interests of Randgold’s shareholders.
Now claims of double-dealing by Investec or its agents — which the company has always denied — may finally be tested in court.
The consortium making the claim includes share broker Anglorand Securities and is led by local businessmen Pat and Dave Smyth.
Their application draws on the little-used section 252 of the Companies Act, which is intended to protect minority shareholders from “oppression” by those who control or run a company.
It makes it possible for any member of a company who complains that the affairs of the company are being conducted in a manner “unfairly prejudicial, unjust or inequitable” to apply to the courts for relief.
The courts have been reluctant to intervene in lawful majority shareholder decisions, but the Act does give them discretion to order a remedy, normally that the majority shareholders buy the shares of the aggrieved minority shareholder at a fair value.
To make Investec liable it would appear that the minority shareholders will have to show that it actively and decisively manipulated the process.
Dave Smyth declined to disclose the evidence on which the claim was based, saying the matter was not yet before court.
The M&G Centre for Investigative Journalism, supported by M&G Media and the Open Society Foundation for South Africa, produced this story. All views are the centre’s. www.amabhungane.co.za.