Times Of Swaziland: STATUS CAPITAL FEARS EMASWATI’S E82 MILLION DIVERTED

STATUS CAPITAL FEARS EMASWATI’S E82 MILLION DIVERTED
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Timothy Simelane and Mbongiseni Ndzimandze on 01/12/2022 08:51:00


MBABANE – EmaSwati investors are in financial jeopardy following allegations
that over E82 million invested through Status Capital Building Society has been
diverted out of the country without authorisation, by another local company.
The directors of the company are allegedly of foreign origin and it is feared
that they are a flight risk. These allegations were made in an ex-parte
application (without the knowledge of the other party) that was filed under a
certificate of urgency, in which Status Capital Building Society wants an order
compelling Swaziland Debt Factoring Firm (PTY) LTD (SDFF), to return money
invested by the building society. It alleged that SDFF was in breach of
agreements signed between the two by failing to account for the use of monies
invested with it.
Agreements
When motivating the application the applicant’s attorney, Joseph Ian Waring of
Waring Attorneys, averred that the financial service company violated two
agreements with the building society known as the Debenture Agreement (DA) and
the Cession Agreement.  Waring also contended that the company purportedly
violated directives of the Financial Services Regulatory Authority (FSRA), which
has been cited as second respondent in the matter. He revealed that stakeholders
in the investment, being the public, had grown weary and impatient with the
applicant (Status Capital) by virtue of the first respondent’s (financial
services company) refusal to account for the use of the funds.
The building society further said it had gathered, on good authority from the
SDFF and its directors, that the latter had ‘diverted a great deal of the
funds advanced to it, to countries other than Eswatini and the applicant had a
well-grounded fear that the first respondent would divert further funds to other
countries making it near impossible to retrieve and recover these funds. Waring
argued that the financial services company had also allegedly refused to allow
Status Capital an opportunity to appoint its own directors to sit on its Board
of directors, in complete violation of the DA and the Cession Agreement. “The
first respondent may, at any time, due to the immense pressure by the applicant
to disinvest, decide to close shop and apply for bankruptcy, to the immense
prejudice of the applicant. The remaining directors and shareholders of the
first respondent are foreign nationals and they have every reason to take flight
instead of paying the monies due to the applicant.”
Waring said the continued refusal by the company to comply with its contractual
obligations to Status Capital indicated that it was unable to pay its debts as
and when they fell due, which put applicants’ investment and security in
jeopardy. He said as a result, other creditors of the company may attach funds
and assets which were contractually due to Status Capital. Waring said the debt
owed to the building society was substantial and, in light of the company’s
alleged continued failure to make payments as promised, there was a real
likelihood that SDFF’s directors would flee the jurisdiction of the court.
Meanwhile, Status Capital’s Compliance and Legal Officer Sanele Kunene brought
it to the attention of the court that SDFF was refusing to pay the money despite
demands being made.
Agreement
Kunene submitted to the court that on July 1, 2020 in Ezulwini, Status Capital,
represented by Dave van Niekerk and Claude Scholtz, in their official
capacities, entered into a written debentures agreement with Marthinus Prinsloo,
who represented the financial company, for an investment amount of E67 293 700.
The money was to be invested in the financial services company. However, Kunene
said this amount was now over E82 million because of arrears. “The first
respondent is, as of October 31, 2022, in arrears in the amount of E82 228 794
29 and despite demand, refused to make payment or cede the security as provided
for in the DA and Cession Agreement,” Kunene’s affidavit read. In terms of
the agreement, the financial services company became the issuer, while Status
Capital was the investor. The intention was that the two entities form a lending
partnership.
Directors
“The investor would place directors on the board of the issuer in line with
global trends. The investor would focus on secured small, medium and micro
enterprises (SMME) loans, housing and building loans to individuals and
companies.” In terms of the debentures agreement, the investor was requested
by the issuer to subscribe for the debentures in accordance with the terms and
conditions specified in the DA and debenture certificate. In its prayers, in the
Notice of Motion, Status Capital now wants the court to interdict and restrain
the financial services company from transacting, making and transfer any payment
from its bank accounts held with the First National Bank. It also wants the
court to direct the company to deliver to Status Capital audited financial
statements, a recent tax clearance certificate, latest quarterly reports and an
assurance report from and independent firm.
Recover
It also wants the court to direct a deputy sheriff to forthwith recover and
deliver to it all these required statements. Status Capital is also asking for
an order compelling the company to appoint its nominated directors to sit on the
company’s board of directors in terms of the debenture agreement as per the
agreement. It also wants the company to surrender its shares and loan books in
terms of the agreement, and to also retrieve all monies due to Status Capital
invested outside the jurisdiction of Eswatini. Should the order be granted, it
must be published in a newspaper circulating in Eswatini as well as the Eswatini
Government gazette to notify the general public that cession in favour of the
building society had been enforced. It also wants the debentures agreement to be
cancelled.