JOHANNESBURG – The Highveld Syndications Action Group (HSAG) says it has applied to have the Orthotouch Scheme of Arrangement rescinded on the grounds that it does not comply with the Companies Act.
The South Gauteng High Court sanctioned the new Orthotouch Scheme in November last year, effectively restructuring the interest payments of the 18 300 investors in the Highveld Syndications (HS) Companies – eight different property syndication schemes.
Orthotouch, a property management company headed by Nic Georgiou, bought properties in the HS Companies in 2011 on the condition that it would pay investors for the properties over five years.
However, investors’ monthly interest payments began drying up until late last year Orthotouch moved to restructure the business in order to sustain it in the longer term, according to Orthotouch, and equitably address the claims and interests of creditors.
As a means to recover their historical investments in the HS Companies, investors were given a choice between three alternatives. By accepting any one or a combination of the alternatives investors made an acceptance in “full and final settlement” of all their claims, according to a synopsis of the arrangement.
Investors were given an opportunity to vote and accept or decline the scheme of arrangement at a meeting on November 12.
Declining the arrangement, investors were told, would lead to the liquidation of Orthotouch, leaving them with “a liquidation dividend of only some 13,64 cents in the rand, which will become payable many years from now, upon the conclusion of the liquidation process and with no payment of any income to the HS Investors during that period”.
Not enough votes
Theron & Partners, a Stellenbosch-based law firm that is also instrumental in the HSAG bringing the class action application on behalf of HS investors, says it has applied to either be given leave to appeal the order sanctioning the scheme of arrangement, or have it set aside.
The application will be heard on May 19 in the South Gauteng High Court.
The law firm bases this application on a number of grounds, including the fact that a large number of investors did not receive notice of the meeting held on November 12 and therefore were not present for the vote.
According to Jacques Theron, investors who were present at the meeting requested that the voting be postponed but were ignored by meeting chair, Derek Cohen.
In addition to the questionable voting process, Theron maintains that Orthotouch was under an obligation to bring certain material information before the court (such as the class action application being brought by the HSAG) when applying for the scheme to be sanctioned, as this may have influenced the court’s ultimate decision.
Theron says the court order should never have been granted, based on the fact that the scheme of arrangement is “flawed in several respects”.
“It is true that the scheme of arrangement, on the face of it, purports to thwart the class action. It is therefore prudent to approach the court to set aside the order sanctioning the scheme of arrangement insofar as it can be interpreted to be binding on individual investors,” Theron explains.
Roughly 7 000 investors have joined the class action application against the HS Companies, although they have not all paid the R1 000 registration fee to participate in the action.