Botswana Building Society Limited (BBSL) board of directors’ victory was cut short on Monday when the bank’s managing director and board secretary obtained a court ruling that nullified their dismissal, turning a new chapter in what is turning out to be a protracted fight.
The Lobatse High Court has ruled that the decision by the BBS board to dismiss the long serving head honcho Pius Molefe and Sipho 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 to be given to board members when a meeting is convened and it should also state the agenda of the meeting.
As such, the dismissal of Molefe and Showa by the board on April 5 was considered null and void. The latest judgement comes exactly a week after the board secured a high court order that supported its decision to dismiss the two senior managers, barring Molefe and Showa from entering the bank’s premises after the two had made it clear that they did not recognize their dismissal, and even went to the extent of engaging private security to keep the board out of the mortgage lender’s headquarters.
Molefe and Showa have accused the board of being vindictive in the decision to dismiss them after they raised objections to the board’s plans to extend its stay by 90 days when its tenure expires on April 26. Instead, Molefe instructed Showa to circulate the agenda for the annual general meeting that is slated for April 30, where shareholders are expected to vote for the new board. It has been suggested that the existing board wants to return to new terms without being challenged for board elections.
The ensuing drama has already caught the eyes of regulators, with the Bank of Botswana closely monitoring the situation, while the Botswana Stock of Exchange had temporarily suspended the trading of the company’s securities before lifting the suspension last week after the board’s victory. By close of business, the BSE had not reacted to the latest developments.
In April 2018, BBS went through a demutualization process by converting from a building society to a company limited by shares. This process was part of the company’s journey to convert to a commercial bank. The process involved selling shares to existing account holders and listing of 487 million shares on the Serala board at P1.20 per share. BBS’ biggest shareholders include the Botswana Privatization Asset Holdings, Motor Vehicle Accident Fund and the Botswana Police Savings and Loans Guarantee Scheme.
The fight between the board and its executive managers happen at a time when the mortgage bank is piling on losses. BBSL recorded a P26 million loss in December 2018 compared to P49.9 million profit registered in March 2018. The loss at the time was blamed on the change in the financial year end from March to December, which affected the bank’s capital structure following its conversion to a company as well as the effects of the implementation of IFRS 9 Financial Instruments.
The losses continued in 2019, with the bank registering P35.7 million and for the year ended December 2020, BBSL recorded a P14.6 million loss. The board and management have disclosed that they are anticipating another loss for 2021 because of continued significant investments in systems and human resources in line with plans to turn into a commercial bank in the last quarter of 2021.