Nova debenture holders stand up to the Sharemax rescue vehicle

Group nominates Deon Pienaar to become the new trustee of the Nova debenture trust.
Image: Moneyweb

The appointment of a new trustee for the Nova Debenture Trust may see Nova debenture holders revolting against the company that failed to repay them per the original Sharemax repayment schedule.

A group of Nova debenture holders sent a letter to Nova and nominated activist Deon Pienaar to become the new trustee of the Nova debenture trust. This trust sets out how former Sharemax investors should be repaid.

The position became vacant after Derek Cohen resigned as the trustee in July 2019.

At the time, Nova stated that it regarded Cohen’s resignation as unlawful and did not initiate the prescribed process to replace him.

The company informed debenture holders it fired Cohen earlier this month and announced it convened a meeting for January 11 next year where debenture holders would vote on a replacement.

Read: Nova board sidesteps disclosure obligations

However, the Nova Debenture Creditors Action Group (NDCAG) sent a letter to the Nova board stating Cohen resigned in 2019 and that Nova did not adhere to the prescriptions set out in the trust deed to replace him, and therefore lost the authority to propose a candidate.

The NDCAG describes itself as an organisation representing “members and debenture holders who have given their proxies to the NDCAG (or will still give) or one or more of its operating committee members.” Herman Lombaard and Roger Johnson signed the letter as operating committee members and debenture holders.

NDCAG’s letter refers to a clause which states that if the Nova board failed to appoint a trustee within the timeframes set out in the trust deed, debenture holders could nominate their candidate.

The Nova board had to inform debenture holders immediately of his resignation in terms of the clause. Nova then had 90 days to nominate a new trustee and convene a meeting where debenture holders could approve his/her appointment. If Nova failed to do this, the debenture holders could nominate their own candidate.

“Given the multiple failures of the company as regards proper actions and communication following the resignation, we believe that the debenture holders have the right, in terms of Clause 15.2 (of the debenture trust deed), to appoint a new trustee on their own,” the letter reads.

NDCAG rejects Nova’s attempt to convene a meeting as Nova acted outside of its authority and says “the meeting should…not take place.”

The organisation also rejected Nova’s nomination of Mr J Tromp as the new trustee. “We reject your nomination of a person who is entirely unknown to the debenture holders, who cannot be found in internet searches and about whom you have not provided any details in your trustee appointment emails, thus leaving it to be (possibly) given, with the minimum detail, at the January 11 meeting and in the usual Nova manner: rush it through with, you hope, a minimum of debate and contestation.”

New candidate

The NDCAG has nominated Pienaar as its candidate to assume the position as the new trustee. The letter highlights that he has fought for affected persons for more than a decade “to address the irregularities and injustices (if not criminality?)” of the events leading up to the demise of Sharemax, the business rescue process, the sanctioning of the Section 311 Schemes of Arrangement (SoA), and the value destruction former investors have suffered.

The letter also states Pienaar would be the ideal candidate as NDCAG believes he has the interests of debenture holders at heart.

The trustee is the trust administrator. If Pienaar is appointed, he will represent debenture holders in an essential structure of the Sharemax rescue scheme. Currently, there isn’t any individual who represents the debenture holders in any Nova structure.

Pienaar’s response

In response to Moneyweb questions, Pienaar said he has in the past, taken legal disputes to court on behalf of thousands of affected parties “whom I refer to as victims of crime”.

“Now for the first time, I will be able to get legal representation to take these legal disputes to court and be treated fairly.

“My cases will no longer be dismissed for procedural and technical reasons only, and the merits may be heard for the first time. I will have a fiduciary duty to present the disputes to court, so that the rule of law can be served, as provided for in our Constitution.

“Secondly, we will have a right to access of information, a right we have been deprived of.”

Pienaar added that Nova has been in breach for some years now.

“The SoA clearly stipulated in which year which building, which had belonged to an independent self-standing property syndication, was to pay back the original share-debenture holders their original capital. Had this SoA properly been regulated as an Sarb approved repayment plan, and the trustee, receivers and regulators done their work for which they were more than generously been compensated, this breach could have been addressed as early as 2014 already.”

“I pray 2022, the Lord permitting can be the end of this saga which has affected so many desolute (sic) victims. It is my prayers that they will all be compensated for their losses as soon as possible and that the persons who acted unlawfully, can all face the consequences of their actions and conduct,” said Pienaar.

“I trust the debenture holders will continue to send their proxies to me at deonpie@mweb.co.za , despite us being in the festive season, a well-planned strategy of Nova.”

Nova must allow the media to attend meetings

The NDCAG also requests that Nova allow members of the media to attend meetings between the company and the shareholders and debenture holders, especially if they have a valid proxy from a debenture holder.

This follows after Nova refused this journalist entry to the company’s recent AGM – despite holding a valid proxy.

Read: Moneyweb editor physically and forcefully denied entry to Nova’s AGM

CIPC actions and postponement of the repayment of debenture holders

These developments follow the CIPC issuing two compliance notices to Nova, which may lead to the company being placed under administration. Nova also announced it would not be repaying any debentures this year, despite promising to start doing so in April.

Nova, which is suspected to have significant financial problems, says it will only start to repay debentures after the expiry of the ten years specified in the trust deed SoA. The ten-year period expires on January 20, 2022.

Read: Sharemax rescue vehicle makes a U-turn on payments to investors

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Nobody wants to have Deon Pienaar as an adversary. He has the memory of an elephant, the determination and endurance of a ratel, and the heart of a Jack Russel. He will destroy the snakes and skunks that cross his way. If anybody is determined to deliver justice to investors, he is the man.

End of comments.

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