Nasty legal showdown at Doves
DOVES Life Assurance Company (Doves) shareholders are embroiled in a nasty High Court battle after Farai Matsika allegedly tried to elbow out his partner Phibeon Busangabanye.
Matsika and Busangabaye bought Doves from incarcerated businessman Munyaradzi Kereke in 2012 through their jointly-owned investment vehicle, Transfrontier Investments (Transfrontier), which they formed in 2008.
Busangabanye claims in his High Court challenge that he and Matsika have a 5050 shareholding in Transfrontier, which acquired 100% shareholding in Doves.
Matsika, he argues, has “refused, neglected or failed” to implement an oral shareholders agreement despite the presence of a memorandum of understanding indicating they held equal shareholding in the company.
He is seeking a High Court order declaring that Transfrontier is the sole beneficiary holder of 100% of the shares in Doves.
Busangabanye also wants the court to direct the two to conclude the shareholders agreement “to apportion shares to their chosen entities and to comply with the Insurance and Pensions Commission (Ipec) regulations” and to restrain other entities from muscling themselves into Doves.
In his application, Busangabanye contends that they acquired Doves as a going concern, and amended Transfrontier’s paperwork to reflect their equal shareholdings. It was agreed that they would pay a purchase consideration of US$2,8 million for the 100% equity held by Kereke’s Rockford Foundation Trust (RFT) and another US$2,2 million (net of taxes) in deferred dividends due to the Trust.
The deferred dividends were to be paid after five years from the date of the transaction, while the purchase price was to be paid in payments of US$500 000, as deposit and monthly instalments. The legal counsels, who chaperoned the transaction advised that Transfrontier could not hold the entire stake alone as that would breach industry requirements, and the group made a decision to introduce two other vehicles to warehouse the shares, Faramatsi and Besilicata.
Upon the parties signing off the agreement on October 12, 2012, Matsika, court documents show, arranged for payment of US$225 000 from Nedbank of South Africa as advance payment for legal fees due to Honey & Blackenberg which, according to Busangabanye’s application, was sourced from Northpark.
His understanding was that the money was meant to be a loan to Transfrontier and that some of it was going towards payment of the deposit since the legal fees were only US$32 000. Matsika is cited as the first respondent while Doves is the fifth respondent.
“This is an application for an order declaring Transfrontier Investments (Private) Limited to be the sole beneficiary holder of 100%of the shares in in Doves Holding Limited, directing Phibeon Busangabanye and Farai Matsika to concludeof US$127 000 monthly instalments a shareholder’s agreement apportioning the shares held in 5th respondent between their chosen entities to comply with legal requirements,” Busangabanye’s application reads.
He is also seeking an order directing Matsika to “attend all procedures obligated and necessary in terms of the Companies Act to effectuate the registration and lodgement of requisite documents recording the respective issued shareholding, directors and secretaries with the registrar of companies”.
Busangabanye further argues that as the chief executive of Doves from 2012 to 2016, he raised US$2,8 million to complete the transaction and a receipt dated July 23, 2014 was issued by Kereke’s RFT.
However, when Matsika assumed leadership of the company subsequently, Busangabanye contends he started reneging on making outstanding payments, resulting in disagreements.
Transfrontier would later pay US$1 556 000 to RTF, leaving a balance of US$644 000, after which Matsika allegedly reneged on their understanding, including completing the shareholder agreement, resulting in Busangabaye approaching the courts for recourse.
Last month, High Court judge Justice Happias Zhou blocked Doves from convening an extraordinary general meeting to elect a new board pending the finalisation of the wrangle following a challenge by Busangabaye.
Busangabanye had argued that the EGM and the process to appoint the new directors were in violation of Ipec regulations.
Matsika had claimed that Busangabanye had no locus standi to institute the application because he was not a shareholder in the assurance firm, but Justice Zhou upheld Busangabanye’s arguments and granted him the interim relief barring the holding of the EGM. Matsika is yet to file his opposing affidavit.