Saturday, May 30, 2020

Ram, Farouk cling to Choppies assets

Founders of Choppies Enterprises Ismail Farouk Ramachandran Ottapathu still have assets of the company registered in their names seven years after the chain store listed on the Botswana Stock Exchange (BSE), a document seen by The Sunday Standard show.  

This emerges from a confidential report compiled for the Board of Choppies by Desai Law Group which forms part of documents before the High Court.

The Choppies retail store group listed on the BSE in 2012 after the company received BSE approval to float 1.2 billion shares on the domestic main board.

The report by Desai Law Group states that “…We have also taken note of Mr Ottapathu’s statement to us that there are a number of other instances in relation to which both he and Mr Ismail have assets of the company registered in his own, and Mr Ismail’s name, such as various butchery licenses, to give but one example.”

The law firm advised: “This appears to have been a peculiarity in relation to the pre-listing days of Choppies and must be corrected in early course.”

According to the report, “The contention by Mr Ottapathu here appears to be that, because he holds certain licenses in his own name, this justifies the similar holding of the Fours Group shares in his name of the benefit and on behalf of the company.”

“This contention is unsupportable in and of itself (the fact that an incorrect act has taken place previously does not justify the occurrence of further incorrect acts). We therefore strongly recommended to the Board Mr Ottapathu be required to produce a full list of any such licenses held in his own name (and /or that of Mr Ismail) in order to initiate requisite processes to have such licenses transferred to the Company at the earliest opportunity,” the report says.

Notwithstanding this, Desai Law Group states that “we are inclined to give Mr Ottapathu the benefit of the doubt in regard to the possibility that the Fours Group shares were held by him so to compete with the Company.” 

“We do not consider that he was doing so in order to compete against the Company (for otherwise, he would not have made disclosure whatsoever, how limited that may have turned out to be, to the Board,” the report reads in part.

It also states that “Mr Ottapathu has made disclosure (even if sporadic, intermittent and incomplete) of the Company’s relationship with Fours Group to the Board and overall there appears to have been no ‘secret’ arrangement  or agreement with Fours Group to the detriment of Choppies or to the personal benefit of Mr Ottapathu (in this connection, although we have not seen or been provided with evidence to that effect, we are advised that Mr Ottapathu he in fact required Fours Group to engage KPMG as auditors so that Fours Group could operate at a professional level and he would not have brought in the Choppies auditors at the time he wanted to compete with Choppies or keep any aspect of the relationship as secret.”

In relation to governance, the lawyers noted that there is an urgent need and requirement to overhaul the governance and structure at Choppies to bring it to best practice standards. The lawyers advised the Board to investigate and understand exact interplay between Choppies and Payless

The Board was also advised “to ascertain immediately position relating to interplay between Choppies and Payless and to engage Competition Authority at the earliest opportunity. Disciplinary proceeding to be contemplated against Mr Ottapathu if facts show breach of the joint undertaking,” the report recommended. The report also recommended that the Board reflects on principle of collective responsibility.

“Choppies Governance Standards in need of overhaul and Investment Committee to be instrumental in the governance process,” the report recommended further.

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Sunday Standard May 24 – 30

Digital copy of Sunday Standard issue of May 24 - 30, 2020.