See: www.carian.co.za/post/flora-centre-debenture-holders-stand-to-lose-p otentially-up-to-100-of-their-initial-investment
This comprises a package of documents including a Response from Dominique Haese, CEO of Nova Propgrow
This content, whilst of specific relevance to holders of Debentures linked to Carletonville and Range View, is also very relevant to all Debenture Holders from the perspective of the solvency and viability of Nova
The Compliance Notice was issued to Nova in August 2022 and it prohibits the sale of any further properties (immovable assets) by the company. This, after some twenty one of the original thirty seven Sharemax properties inherited by Nova in the BRP/SoA process back in 2010/12 were sold (E&OE on these figures). The compliance Notice also triggered CIPC to open an internal investigation into Nova’s repeated failures to meet its obligations under the Companies Act and the failure to repay all of the Debentures by the “10 year deadline” as per the SoAs. (This deadline is contested by Nova). The internal investigation will result in a Companies Tribunal to address the findings with Nova
Whilst some debentures were repaid in 2012/13, the company stopped repaying and, on their own admittance (but , only communicated to Debenture Holders in one of Nova’s Communiques in September 2019), started retaining property sale proceeds to finance ongoing operations and to provide the funds to keep the company afloat amid growing concerns as to its solvency
According to Tromp’s new posting regarding a loan which Nova arranged with Mercantile Bank (since bought by Capitec), for which, they pledged as security, Flora Centre, Carletonville Centre and Range View Centre, but have defaulted on the mortgage payments, Capitec have lodged an application for liquidation of Flora Centre Investments (Pty) Limited, the entity within Nova Propgrow Group that owns Flora Centre and a judgement against Nova could see Flora Centre being attached and sold off to repay the loan
Nova sought and have received “favourable” legal opinion to the effect that if the pledged properties are sold in execution of a court judgement, then such sale is not a circumvention of the CIPC Compliance Notice prohibiting sale of the properties.
Based on this opinion. Nova have proposed to Capitec that that both the Carletonville and Range View properties be accepted as settlement of the loan.
The proposal reads:
“We have taken legal advice from Advocate (blanked out) on how we overcome this prohibition. The advice is that the subject matter property (the surety properties [Carletonville and Range View]) may be disposed of under circumstances of a sale following a Court Order in the form of a judgement and in execution of such judgement. We therefore suggest that a Summons is issued, judgement is obtained, and the property/s sold in pursuance of the judgement”
Tromp suggests that Flora Centre is far more “valuable” as an asset in the company’s books and the board would not want to lose that following Court judgement in favour of Capitec
But, we have here a case of blatant sacrifice of two properties to suit their own interests – with the negative of a court judgement against the company (Nova) on record – and in the process, removing the underlying assets that are supposed be the base off which the Carletonville and Range View debentures can be repaid
We ask: is the pledging of portfolio properties – thus putting them at risk – in itself not a circumvention of the Compliance Notice?
And, we ask: is a taken course of action which they admit is a ploy “to overcome this prohibition” (selling of the portfolio properties) not also a flagrant demonstration of disregard of the authority of CIPC?
Was the taking of the loan, in fact, part of a strategic plan devised by the Board, to bypass CIPC’s asset sell-off prohibition per which they pledged the three properties as security in order to obtain funds to keep the company afloat but with the premeditated intention to default and then sacrifice the two “lesser” properties to the lending bank in settlement of the loan?
And, we have the Board, once again, expending company funds to get legal opinion that supports their strategy and proposed action that is not in the interests of the Debenture Holders!
Tromp goes on to inform that once sold off, these two properties (and any of the other portfolio properties sold) will not exist in the Nova books anymore meaning that the assets that could realise the funds necessary to repay the underlying Debenture liability, have disappeared and Nova’s capability to create the funds necessary to repay has been further diminished. See our October 1 post on “The Missing R414 million” and Tromp’s post on same in his web site
How will CIPC react to this news? Will they accept Tromp’s allegations as being valid and take action? Perhaps bring the Companies Tribunal on Nova into immediate action? Perhaps more stringent action?
Is all lost for the relevant Debenture Holders as Tromp has stated?
Perhaps not, but only if the CIPC Investigation into the 2010 shut-down of the PSPC’s can move forward and deliver the Final Report and if its recommendations (expected to confirm the long-alleged illegalities and the irregularities of the shut-down) are followed through with ultimate restitution and compensation for all Sharemax Investors
We will be sharing this post with Cuma Zwane who is the Senior Investigator: Corporate Compliance and Disclosure Regulation at CIPC, in support of Tromp’s submissions to them