The board of the Nova Property Group, the rescue vehicle of the erstwhile Sharemax property syndication group, last week sent at least two communications to its 31 000 debenture holders in an attempt to calm down many of them who have been “disturbed” by Moneyweb’s recent revelations.
The Nova board came out swinging by claiming that the articles are “negative, biased and mostly incorrect”, and refers debenture holders to the “correct” information that appears on the Frontier website. Read the full statement here.
These communications followed the publication of several Moneyweb articles in recent weeks about how the four Nova directors have managed to secure 87.1% of the shareholding and 91% of the voting rights in Nova without paying a cent.
This was revealed when Nova opened its shareholder registers to Moneyweb after the board fought for more than three years in various courts to keep their shareholding a secret.
The directors’ dominant shareholding also made it possible for them to pay themselves exorbitant salaries, whilst the board also recently announced that all interest payments to debenture holders were suspended.
The Nova board also said in the communication that the negative media reports are “regrettable, especially having regard to the inordinate amount of time and effort that the Group has invested in sharing correct and detailed information with relevant media, as appears from the information contained on the Frontier website”.
This is not quite accurate, as the board’s reference to an “inordinate amount of time” actually refers to one physical meeting lasting around 90 minutes at which the board opened the shareholder registers to Moneyweb, and then answering three sets of emailed questions. Nova CEO Dominique Haese also gave a radio interview. Unfortunately, the board does not disclose that it terminated all communication with Moneyweb prior to the publication of the first article and did not find the time to answer three additional sets of questions.
Despite the Nova board’s response and accusations of incorrect reporting, the board offers no new reasons to counter the serious allegations Moneyweb makes. In fact, Nova only republishes the transcript of the Haese/RSG interview, and the emailed questions and answers between Moneyweb and the board that have already been published on Moneyweb.
There is no official response or additional information from the board to refute Moneyweb’s information.
Below appear 24 indisputable facts related to the Nova directors, how they managed to “capture” a dominant shareholding in the company and how this shareholding has influenced their decision making.
- 95.7% of Nova is owned by the 4 directors and 3 current and former senior executives of Nova, through a nominee company, Nova Nominees, which holds these shares on behalf of the directors and senior executives.
- These shares were issued to Nova’s 4 directors and 3 senior executives for free in August/September 2013.
- About 2 000 former Sharemax investors who elected to receive shares and not Nova debentures, secured 4.3% of Nova’s issued shares, but effectively paid R94 million in total or 98c for each share.
- Before issuing shares to the 2 000 Sharemax investors, the shares were stripped of all voting rights, which meant that the shares issued to the directors and senior executives, exercised 100% of the shareholder votes in Nova.
- Chairman Connie Myburgh, frequently referred to as the architect of the Section 311 scheme of arrangement, received 21.8% of the Nova shares without paying a cent.
- The other three directors, Haese, Rudi Badenhorst (financial director), and Dirk Koekemoer (chief operating officer) each received between 21.6% and 21.8% of the shares without paying a cent. The remaining three senior executives pocketed the remaining 8.7%, also for free.
- Haese and Koekemoer were also directors of Sharemax.
- These four directors have been the only directors on the Nova board since 2012.
- The four directors of Nova received their free shares in Nova while they were also employees, and are liable for tax on the gain they made.
- The four directors received their shares courtesy of one paragraph hidden away in an appendix of the original Section 311 scheme of arrangement document. The effect of this paragraph was not discussed or explained anywhere else in the documentation.
- Dawie Roodt, the well-known economist, a previous director of the syndication companies and key proponent of the scheme was not aware of this clause and the eventual impact – that it would hand 87.1% of Nova’s shares to the directors for free.
- The four directors kept their shareholding a secret. The shareholding was not disclosed to debenture holders. Haese has said in the RSG interview that Nova has disclosed it to “relevant stakeholders at relevant times”, but it is apparent that it was never disclosed to debenture holders. Apart from Roodt, Moneyweb has spoken to more than 100 debenture holders, 25 shareholders and various other stakeholders and not one person was aware of the directors’ dominant shareholding.
- The four directors fought an application of former Moneyweb journalist Julius Cobbett and Moneyweb to access the shareholder registers for more than three years in various courts. (The board was eventually forced to hand over the shareholder registers after the Constitutional Court denied them leave to appeal against a Supreme Court of Appeal judgement that stated that they had no option but to open up their shareholder registers.)
- In response to Moneyweb’s questions, Nova’s auditor, BDO, is undertaking an extensive investigation covering the period of the last five years.
- If Nova manages to repay all the debenture holders, the board members will own the majority share in all the remaining property assets that were transferred from the historic Sharemax schemes.
- The four directors are paid salaries that are out of kilter with industry norms. They each earn between R280 000 and R346 000 a month.
- The four directors pay themselves approximately R1 for each R3 paid out to 31 000 debenture holders.
- Under the leadership of the four Nova directors the company’s operational activities have never been cash flow positive. This means that operational expenses, which include the directors’ salaries, are financed through the proceeds from the sale of buildings and external loans.
- The Nova board does not adhere to the King III codes of good corporate governance. In fact, Haese said in a radio interview that it is “unfair” to expect the board to adhere to the King III codes.
- The board is not overseen by an independent audit committee, contrary to the requirements of the Companies Act 2008.
- Debenture holders have absolutely no rights to influence the way the directors run the company. They have no representation on the board or an official platform such as an AGM through which they can engage with the board. They are totally at the mercy of the board.
- There is not a director on the Nova board with the sole responsibility to represent the interests of debenture holders.
- The 2 000 Sharemax investors who elected to receive Nova shares, also do not have any say in how Nova is run. The four directors decided to issue class D shares without any voting rights to these shareholders.
- The 31 000 debenture holders and 2 000 class D shareholders cannot remove the four directors from the board.
|Shareholder||A Shares||B Shares through Nova Nominees||D shares||% of total Equity||% Voting (direct & indirect)|
|Connie Myburgh||10||510 712 950||21.80%||22.80%|
|Dominique Haese||10||510 712 950||21.80%||22.80%|
|Dirk Koekemoer||10||510 712 950||21.80%||22.80%|
|Rudi Badenhorst||10||506 233 012||21.60%||22.60%|
|Corrie van Rooyen||10||67 199 072||2.90%||3.00%|
|Matthew Osterloh||10||67 199 072||2.90%||3.00%|
|Nel van Zyl||10||67 199 072||2.90%||3.00%|
|2000 former Sharemax investors||99 923 617||4.30%||0%|
|Total||70||2 239 969 079||99 923 617||100.00%||
Nova suspended all communication with Moneyweb.
Here is an earlier response from Haese confirming this:
Dear Mr van Niekerk,
It is regrettable that our efforts in engaging Moneyweb openly, constructively and in a bona vide fashion has not been reciprocated. In response Moneyweb has chosen to publish articles without prior reference to us, and in breach of your undertaking to allow us to see and comment on the articles first, which articles twist the facts, articulate a number of inaccuracies and untruths and seek to slander and defame the Nova Group and its directorate. We are considering our position and our rights in this regard are reserved.
It has become clear to us that any information that is provided by us to Moneyweb, will be twisted and used out of context for the purpose of further negative reporting of and concerning the Nova Group and its directorate and given that no further productive purpose would be served in engaging with Moneyweb, the Nova Group has decided to break off all forms of communication with Moneyweb. We will accordingly no longer respond to questions Moneyweb pose to us, requests for commentary on proposed articles or for that matter to any articles that Moneyweb might publish, subject of course to a reservation of the right to deal with any matter Moneyweb might publish, in a court of law.
Please ensure, should you elect to publish anything further regarding the Nova Group and any of its functionaries, that you include in such publication our above position, verbatim.
CEO Nova Property Group