PIC, Ayo and CIPC to meet in court

Former chief executive Dan Matjila is alleged to have signed an irrevocable subscription agreement to invest in Ayo before the requisite committee could approve it and without due diligence being done. (David Harrison/M&G)

Former chief executive Dan Matjila is alleged to have signed an irrevocable subscription agreement to invest in Ayo before the requisite committee could approve it and without due diligence being done. (David Harrison/M&G)

The Public Investment Corporation (PIC) will meet the companies regulator at the high court in Pretoria in a bid to set aside the compliance notice instructing the PIC to recoup the R4.3-billion it invested in Ayo.

Ayo has also filed an urgent application for the compliance notice to interdicted which will be heard at a later date.

The Companies and Intellectual Property Commission (CIPC) — the company watchdog which administers the Companies Act — issued the compliance notice after it found PIC directors were in breach of the Act and did not act in good faith nor in the best interests of the institution when they invested in Ayo.

READ MORE: PIC going after R4.3-billion paid to Ayo

The PIC paid R43 per share in a rushed transaction when Ayo listed on the Johannesburg Stock Exchange (JSE) in December 2017. Testimony before the PIC commission and an investigation by the PIC found that former chief executive Dan Matjila signed the irrevocable subscription agreement to invest in Ayo before the requisite committee could approve it and without due diligence being done.

The PIC was meant to recoup the money in 15 days from when the notice was issued, which is March 14.

While Ayo and the PIC are seeking the same outcome — for the motion to be set aside — it is for different reasons.

The PIC has indicated in its court papers that it expects resistance from Ayo which has publicly stated that the share purchase was valid while the compliance notice is invalid. Under these circumstances, the PIC said that it would be impossible to meet the deadline set out by the CIPC.

Further, the PIC said the procedure followed by the CIPC in issuing the notice was “unfair and unlawful”. The state asset manager and its directors were not given an opportunity to respond and it says it was based on inaccurate information that the board had approved the transaction and therefore not fulfilling its fiduciary duties. It was Matjila who approved the transaction.

The PIC said if the CIPC had approached the PIC it would know that the PIC has already begun a “complex and ongoing” process of trying to recoup the money with help from external legal advisors.

In a separate application calling for an interdict against the compliance notice, Ayo states that the CIPC’s conduct was “unprecedented” and it felt that it had no choice but to approach the court in order to protect its rights and interests. This is especially because both the PIC and then CIPC have kept Ayo “in the dark” about whether the notice will be enforced and what process will be followed.

“In the event that the PIC enforces compliance with the compliance notice, Ayo’s financial and business interests, reputation, material contracts, international partnerships with multinationals and potential loss of key employees, will be substantially and detrimentally affected,” said Ayo in its court papers.

The PIC has made it clear that it is in agreement with the CIPC about recouping the R4.3-billion and its application should not be read as a collaboration with Ayo.

At the same time the PIC commission, headed by retired Judge Lex Mpati, will continue with testimony from Lebogang Molebatsi, general manager of listed equities at the PIC. In December 2017, while acting as the executive head for listed equities, Molebatsi co-signed the irrevocable subscription agreement upon instruction from Matjila.

He told the commission that one of the main reasons he signed the form, prior to the requisite committee ratifying it was, because Matjila had assured him that there was nothing untoward about the process.

“I did not want to be accused of insubordination against the [chief executive] given that I did not know of a policy that prohibited ratification and could not use that as an excuse not to do as the chief executive of the organisation had instructed,” Molebatsi said. 

This article has been amended to reflect that the Ayo application will not be heard on Tuesday but at a later date.

Tebogo Tshwane

Tebogo Tshwane

Tebogo Tshwane is an Adamela Trust financial journalism trainee at the Mail & Guardian. She was previously a general news intern at Eyewitness News and a current affairs show presenter at the Voice of Wits FM. Tshwane is passionate about socioeconomic issues and understanding how macroeconomic activities affect ordinary people. She holds a journalism honours degree from Wits University.  Read more from Tebogo Tshwane

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