STATUS CAPITAL FEARS EMASWATI’S E82 MILLION DIVERTED

MBABANE – EmaSwati investors are in financial jeopardy following allegations that over E82 million invested through Status Capital Building Society has been diverted out of the country without authorisation, by another local company.

The directors of the company are allegedly of foreign origin and it is feared that they are a flight risk. These allegations were made in an ex-parte application (without the knowledge of the other party) that was filed under a certificate of urgency, in which Status Capital Building Society wants an order compelling Swaziland Debt Factoring Firm (PTY) LTD (SDFF), to return money invested by the building society. It alleged that SDFF was in breach of agreements signed between the two by failing to account for the use of monies invested with it.

Agreements

When motivating the application the applicant’s attorney, Joseph Ian Waring of Waring Attorneys, averred that the financial service company violated two agreements with the building society known as the Debenture Agreement (DA) and the Cession Agreement.  Waring also contended that the company purportedly violated directives of the Financial Services Regulatory Authority (FSRA), which has been cited as second respondent in the matter. He revealed that stakeholders in the investment, being the public, had grown weary and impatient with the applicant (Status Capital) by virtue of the first respondent’s (financial services company) refusal to account for the use of the funds.

The building society further said it had gathered, on good authority from the SDFF and its directors, that the latter had ‘diverted a great deal of the funds advanced to it, to countries other than Eswatini and the applicant had a well-grounded fear that the first respondent would divert further funds to other countries making it near impossible to retrieve and recover these funds. Waring argued that the financial services company had also allegedly refused to allow Status Capital an opportunity to appoint its own directors to sit on its Board of directors, in complete violation of the DA and the Cession Agreement. “The first respondent may, at any time, due to the immense pressure by the applicant to disinvest, decide to close shop and apply for bankruptcy, to the immense prejudice of the applicant. The remaining directors and shareholders of the first respondent are foreign nationals and they have every reason to take flight instead of paying the monies due to the applicant.”

Waring said the continued refusal by the company to comply with its contractual obligations to Status Capital indicated that it was unable to pay its debts as and when they fell due, which put applicants’ investment and security in jeopardy. He said as a result, other creditors of the company may attach funds and assets which were contractually due to Status Capital. Waring said the debt owed to the building society was substantial and, in light of the company’s alleged continued failure to make payments as promised, there was a real likelihood that SDFF’s directors would flee the jurisdiction of the court. Meanwhile, Status Capital’s Compliance and Legal Officer Sanele Kunene brought it to the attention of the court that SDFF was refusing to pay the money despite demands being made.

Agreement

Kunene submitted to the court that on July 1, 2020 in Ezulwini, Status Capital, represented by Dave van Niekerk and Claude Scholtz, in their official capacities, entered into a written debentures agreement with Marthinus Prinsloo, who represented the financial company, for an investment amount of E67 293 700. The money was to be invested in the financial services company. However, Kunene said this amount was now over E82 million because of arrears. “The first respondent is, as of October 31, 2022, in arrears in the amount of E82 228 794 29 and despite demand, refused to make payment or cede the security as provided for in the DA and Cession Agreement,” Kunene’s affidavit read. In terms of the agreement, the financial services company became the issuer, while Status Capital was the investor. The intention was that the two entities form a lending partnership.

Directors

“The investor would place directors on the board of the issuer in line with global trends. The investor would focus on secured small, medium and micro enterprises (SMME) loans, housing and building loans to individuals and companies.” In terms of the debentures agreement, the investor was requested by the issuer to subscribe for the debentures in accordance with the terms and conditions specified in the DA and debenture certificate. In its prayers, in the Notice of Motion, Status Capital now wants the court to interdict and restrain the financial services company from transacting, making and transfer any payment from its bank accounts held with the First National Bank. It also wants the court to direct the company to deliver to Status Capital audited financial statements, a recent tax clearance certificate, latest quarterly reports and an assurance report from and independent firm.

Recover

It also wants the court to direct a deputy sheriff to forthwith recover and deliver to it all these required statements. Status Capital is also asking for an order compelling the company to appoint its nominated directors to sit on the company’s board of directors in terms of the debenture agreement as per the agreement. It also wants the company to surrender its shares and loan books in terms of the agreement, and to also retrieve all monies due to Status Capital invested outside the jurisdiction of Eswatini. Should the order be granted, it must be published in a newspaper circulating in Eswatini as well as the Eswatini Government gazette to notify the general public that cession in favour of the building society had been enforced. It also wants the debentures agreement to be cancelled.

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