Shareholders threaten legal action over 4Sight drama

Shareholders of 4Sight Holdings have demanded an explanation as to why a special meeting, which took place on 11 October to remove and appoint directors, was “improperly” and “unlawfully” adjourned.

The drama surrounding the JSE-listed technology company has intensified following the aborted meeting, with a legal letter in TechCentral’s possession showing some shareholders – claiming to be in the majority – are prepared to take legal action to find a solution to their grievances.

At the heart of the dispute appears to be a battle between rival shareholder groupings for control of 4Sight.

In a legal letter dated 14 October and sent to the 4Sight board by WWB Botha Attorneys — which claims to act for shareholders representing a majority of 4Sight Holdings equity — it’s alleged that the appointed chairman at 11 October’s special meeting, 4Sight executive director Tinus Neethling, called a recess 90 minutes after its commencement to consult with legal counsel.

“On returning to the special meeting and without allowing any discussion on the matter, the chairman unilaterally adjourned” the meeting, the letter said. “The adjournment was made unilaterally at the insistence of the chairman, without such adjournment having been proposed by any shareholder in the special meeting and without any discussion on the matter.”

The meeting was chaired by Neethling following the sudden resignation last week of former board chair Rama Sithanen, who would otherwise have led it.

‘Manifestly false’

In a statement to shareholders after the meeting, 4Sight said the adjournment followed “detailed discussions during which certain minority shareholders advised that there was insufficient information in relation to all the proposals on which to make an informed decision”. This, the WWB Botha Attorneys letter said, is “manifestly false and a misrepresentation of what transpired”.

“We require and demand the recording (or a full transcript) of the proceedings at the special meeting to be made available to our clients” as well as the JSE and Mauritius registrar, where 4Sight is incorporated.

“The record of the special meeting will evidence that the statement made by the company is false and misleading and evidences a contrived basis on which the meeting was unlawfully adjourned, with the intention (or at least the effect) of unlawfully frustrating the lawful exercise of the most fundamental right afforded to shareholders, namely to determine the constitution of the board and to remove directors who no longer enjoy the confidence of the shareholders and appoint new directors…”

“In adjourning the special meeting, the chairman acted improperly, unlawfully and in breach of his fiduciary duties.

“The adjournment of the special meeting was clearly aimed at unlawfully frustrating the lawful and effective exercise by shareholders of their fundamental statutory rights and rights under both the Mauritius Companies Act and the company’s constitution…

“Shareholders present or represented by proxy at the special meeting and which represented shareholders holding a majority of the issued share capital objected to any adjournment and challenged the competence of the unilateral decision by the chairman. The chairman gave no reasons or justification for an adjournment, but implied that the reason for adjournment was that there had been a ‘lack of transparency’ of information to shareholders.”

The shareholders represented by WWB Botha Attorneys have demanded that a new meeting take place no later than 6 November and that it be chaired by an “independent, competent person” who is acceptable to them.

They also want the company to publish an updated statement, through the JSE’s Sens news service, “correcting the false and misleading statement of the 11 October Sens announcement”.

“If these undertakings are not provided as required, our clients will need to approach the courts on an urgent basis for appropriate relief,” the letter said. “Given that it would be manifestly unjust for the company to incur any resultant legal costs and expenses (which would indirectly be borne by shareholders, including our clients) all such costs and expenses … will be for the account of the individual members of the existing board…”

Engaging through attorneys

In response to a query from TechCentral about the legal letter and the allegations contained therein, a 4Sight spokesman said: “4Sight board members are currently engaging with our attorneys and advisors regarding the special general meeting held on 11 October pertaining to the feedback and statements provided by some shareholders… We are engaging through our attorneys with those shareholders’ attorneys. Until such time as the attorneys have completed their engagements, 4Sight is not in a position to comment…”

The latest developments come a day after 4Sight told shareholders that its board had been informed that the directors of Foursight Holdings, the “intermediary holding company of some of the South African subsidiaries”, had passed a resolution placing Foursight into business rescue. Foursight, the statement from 4Sight said, is “heavily dependent on the cash flows in the form of dividends and management fees from its profitable subsidiary companies. These flows of funds have not materialised, thus placing Foursight Holdings in financial distress.”

Ahead of the 11 October special meeting, two directors resigned from 4Sight’s board. Geoffrey Carter — chairman of 4Sight’s audit and risk committee — resigned on 7 October warning of “belligerent breaches in corporate governance, ill-disciplined financial transgressions and continuous disagreements” regarding the “interpretation to (sic) certain clauses in the sale of shares agreement”.

A day later, the chairman, Sithanen, resigned with immediate effect “due to his intention to re-enter politics in Mauritius”.

The drama at the company appears to have started on or before 23 August, when 4Sight issued a statement informing shareholders that the board had received correspondence from a shareholder holding at least 5% of the voting rights in the company that required it to call a special meeting, the aim being to reconstitute the board.
The meeting was called to comply with a demand from shareholders Morne Swanepoel (who holds 14.6% of the company’s equity); Jaco Botha (12.4%); Mari-Louise Zitzke (11.6%); and Tertius Zitzke (3.1%). All four individuals had sold their companies to 4Sight in the 2018 financial year.

Adapt IT interest

According to a 5 September statement, the shareholders wanted the meeting to vote on the removal Gary Lauryssen, Vincent Raseroka, Carter and Jason du Plessis as directors and the appointment of Tertius Zitzke, RP Dreyer and E van der Merwe to the board. In a later statement, an additional resolution was added, seeking the election of Botha — the 12.4% shareholders — as a director.

Then, on 19 September, 4Sight Holdings said it had received a “credible, non-binding expression of interest, with a request for exclusivity, for the acquisition of all the shares in 4Sight”. The board granted the unnamed bidder the exclusivity sought. TechCentral has learnt from two separate sources that JSE-listed software group Adapt IT has shown an interest in buying 4Sight. — © 2019 NewsCentral Media