Thursday, August 5, 2021

Millions of shares unclaimed at BBS Limited as fight rages

The disagreements between Botswana Buildings Society Limited (BBSL) board of directors and the two senior executives reached another low this week as it became clear that the upcoming shareholder meeting will be fireworks, and might even protract the fight as millions of shares remain unclaimed.

On early Friday morning, the board chairperson Pelani Siwawa-Ndai announced that the company has suspended managing director Pius Molefe and the board secretary Sipho Showa, after failed attempts to dismiss the senior managers who the board accuses of insubordination.

The suspensions are with full pay pending ligation brought against the board by Molefe and Showa – who is also suspended from his duties as the head of marketing and communication. The fight between the board and the senior managers has stretched to the third week and has been characterised by counteraccusations, with some playing out in the public and the courts of law.

Fissures within the company started on April 5 when the board dismissed Molefe and Showa for alleged misconduct and insubordination. It appears that Siwawa-Ndai and the other four directors,  both seeking re-election as their board terms come to an end on April 26, were irked by the notice of meeting and agenda for the BBSL annual general meeting scheduled for 30 April 2021, which included resolutions on new nominees as prospective directors of the company without their input.

“In line with Article 53 of the BBSL of the constitution, the BBSL Board Charter and the King Code on Governance Principles, the company has a clear process by which the entire board, on behalf of shareholders, may nominate prospective directors for approval by the shareholders at a general meeting,” disclosed Siwawa-Ndai in a statement.

“Stakeholders are advised that the board did not approve or vet the nominee directors, as required by the BBSL Board Charter/King III, and has thus far failed to receive satisfactory answers from Messrs Molefe and Showa as to how these names had been included in the notice, which had been published without the company’s approval.”

According to the board chairperson, the process requires a shareholder to propose names to the board and not management. The board then makes a recommendation to the shareholders at an AGM. Such names or proposals should be made to the board not less than 21 working days before the AGM.

Still, Molefe and Showa challenged the dismissal, first by refusing to vacate their offices and engaging a private security to prevent the board from entering the bank’s headquarters. Molefe who has been the company’s managing director for nearly 20 years and whose contract is ending in December, issued a statement accusing the board of trying to ‘illegally’ extend their terms by 90 days by deferring the election of directors, and disclosed that he is hard at work preparing for the imminent shareholder meeting.

However, the board obtained a court order on April 9 that supported the decision to dismiss the senior managers, in addition to prohibiting Molefe and Showa from acting as representatives of the company and barred them from communicating with shareholders and key stakeholders. The board’s victory was however cut short as the senior executives also approached the high court to challenge their dismissals.

On 19 April, the Lobatse high court ruled that the decision by the BBS board to fire Molefe and Showa was invalid as the board meeting was in breach of the company’s constitution. The board which is made up of some of the country’s experienced board members failed to comply with clause 75 of the BBSL constitution which requires that a notice of at least 7 days should be given to board members when a meeting is proposed, and it should also state the agenda of the meeting.

Before the dust could settle, the board struck again, informing Molefe and Showa  that their contracts will still be terminated using the company’s constitution clause 80 which allows for termination without a hearing. But this was never to see light of the day as Molefe and Showa quickly rushed to the industrial court to interdict the planned dismissals by the board.

“In order to abide by the court order, the company wishes to advise stakeholders that it then resolved to suspend, on full pay, Messrs Molefe and Showa from their duties with effect from 20 April 2021 pending the finalisation of the proceedings brought against the company by the suspended employees, or the completion of investigations into possible professional misconduct by Messrs Molefe and Showa,” Siwawa-Ndai said.

Molefe and Showa have refused to observe their suspensions and have written the company to state they will continue to report for duty in defiance of a lawful order from their employer, the board chairperson said. She revealed that the suspended employees have taken the BBSL premises and communications facilities hostage and have employed private security to refuse the board members access to BBSL premises.

 “Stakeholders are advised that the laws of Botswana do not permit self-help remedies and that it is unlawful for any employee, including senior management such as Messrs Molefe and Showa, to refuse to obey a suspension ordered by their employer.”

The disagreements between the board and its managing director happen at a time when the company is undergoing a transition to a commercial bank. In April 2018, BBS went through a demutualization process by converting from a building society to a company limited by shares. The company sold shares to existing account holders and listing of 487 million shares on the Botswana Stock Exchange’s Serala board at P1.20 per share.

As it becomes clear that the disagreements will be resolved by shareholders at the upcoming annual meeting next week, eyes will be on major shareholders and thousands of other shareholders who have not yet claimed their shares, creating another potential pitfall.

BBSL’s biggest known shareholders include the wealthy Brink family that controls 17.31 percent of the company;  the government through Botswana Privatization Asset Holdings which holds 14.84 percent; the Botswana Police Savings and Loans Guarantee Scheme’s 9.20 percent shareholding; Motor Vehicle Accident Fund’s with a 7.55 percent; the first Motswana police commissioner Simon Hirschfeld has 2.71 percent interest, the estate of the late Abdul Joseph holds 2.50 percent while Botlhale Investments owns 2.26 percent.

The remaining 43 percent, representing 211.8 million shares, in BBSL belongs to individual shareholders, of which millions of the shares remain unclaimed, according to the company’s 2020 annual report. The company said some of the shareholders that may have closed their accounts are shareholders as they were given free shares as appreciation for their investments over the years when BBSL became a company in 2018.

Besides the boardroom brawl, BBSL’s transition that started three-years ago has been marked by piling losses.  In 2018, the company registered a P26.1 million loss, which then grew to a P35.7 million loss in 2019, and for the financial year ended December 2020, BBSL posted a P14.6 million loss.

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