Capital Management Africa and Rapula Okaile have filed papers with the High Court opposing the liquidation proceedings against Capital Management Botswana (CMB). They want the court to rescind and set aside the final winding order issued on 18th of September 2018.

The tussle between the two entities is said to be motivated by the urge to regain assets which are estimated at a value of close to P477 million. Shareholders of CMB are accusing Non-Bank Financial Institution Regulatory Authority and Botswana Public Officers Pension Fund (BPOPF) of using false information to motivate the court to liquidate CMB.

There has been numerous court battles relating to Capital Management Botswana (Pty) Ltd (CMB), the Non-banking Financial Services Regulatory Authority (NBFIRA); the Botswana Public Officers Pension Fund (BPOPF), and Bona Life (Pty) Ltd (Bona). The matter involved a process instituted collectively by NBFIRA, BPOPF and Bona to place CMB under statutory management. The appointment of statutory manager Peter Collins was rejected by the High Court but subsequently the Appeal Court confirmed the Collins’s appointment.

Non-Bank Financial Institution Regulatory Authority and Capital Management Botswana (CMB) are first and second respondents respectively. Okaile has a 25% shareholding in CMB which he says justifies his joining in of the liquidation proceedings; on the other hand CMA is also a shareholder in CMB with a 75% stake.

NBFIRA brought the liquidation proceedings against CMB. “I am advised by my attorneys which advise I verily believe that in terms of the Section 166 of the Companies Act, the court in an application by shareholders of a company may grant leave to intervene and or join legal proceedings in which the company is involved,” writes Okaile.

“…we as shareholders of the 2nd respondent wish to be permitted to intervene and join the said proceedings and oppose the liquidation of the 2nd Respondent.” Okaile states that as shareholders of CMB and also respondents to the petition they have a direct interest in the liquidation proceedings hence their move to join the proceedings.

Okaile and CMA say they wish to intervene and be joined as co-respondents in the liquidation proceedings to oppose the proceedings on the basis that once the 2nd Respondent/ Respondent which as per the petition has been placed on statutory management and the statutory manager has compiled his reports and is done with statutory management, there is therefore no basis whatsoever to liquidate the 2nd Respondent/ Respondent.

According to the petition, the basis of the winding up order is basically that the Respondent (CMB) is insolvent and it is unable to pay its debts and its liabilities exceed its assets, and that there are no prospects that the Respondents will be restored to solvency within a reasonable period.

“I dispute and deny that the respondent is insolvent. I would aver that the Respondent owns a block of flats whose market value is P14 million, as shown by the valuation report…I also dispute and deny that even supposing without conceding that the Respondent was insolvent, that it cannot be restored to solvency within reasonable period…I dispute and deny that the CMB is even if it was there, it would have provided sufficient grounds for the liquidation of the Respondent as a suit is simply a suit and not a debt and it cannot be ground for liquidation,” writes Okaile.

Okaile narrates that the basis upon which the liquidation is alleged to be made is patently false and goes on to indicate that the petitioner has failed to demonstrate as to why it is alleged that there are no prospects that CMB could be restored to solvency within a reasonable time.

Okaile denies claims that CMB has rental arrears; further says the company does not have any employees because they were dismissed way back in April 2018 by the Statutory Manager. According to Okaile, the statutory manager has never made an attempt to demand for recapitalization of CMB, “should such a demand for capitalization have been made, the Applicants would have made an effort to do so.”

In another matter that Okaile denies, “The Respondent does not owe Lobatse Clay Works (Pty) Ltd and Yarona Media Holdings (Pty) Ltd P60 million and P17 million respectively. The monies alleged as debts are monies which the Botswana Opportunities Partnership (BOP) comprising of CMB and BPOPF were to invest in the said companies. These are not debts but proposed investments that the BOP and not the Respondent were to make in the said companies.” Okaile writes that the investments were not made because the partners in the BOP fell out.

THE BACKGROUND TO THE DISPUTE – ACCORDING TO PETER COLLINS 

“CMB was appointed by BOP as its fund manager and CMB, in its capacity as General Partner delegated responsibility for the management of BOP to CMB in its capacity as fund manager. BPOPF made a capital commitment1 to contribute up to BWP500,000,000 to BOP. In 2015 and 2016 various drawdown notices were issued to BPOPF by CMB on behalf of BOP for the purpose of investing in certain identified private equity investments and for agreed fund expenses and fees. BPOPF duly paid the aforesaid drawdown notices amounting in aggregate to some BWP470,000,000.00.

On 24th August 2017, BPOPF notified CMB that it was in breach of the BOP Agreement, and demanded an explanation from CMB and rectification of various issues, arising out of the BOP Agreement. On 20th September 2017 a drawdown notice was issue by CMB for an amount of BWP77,000,000.00 (“Disputed Notice”) for the purchase of shares in Lobatse Clay Works (Proprietary) Limited and Yarona Media Holdings (Proprietary) Limited.

BPOPF refused to pay and contended that the Disputed Notice was not binding on BPOPF. They asserted that their refusal to comply with the Disputed Notice did not result in an actionable breach of the BOP Agreement, because inter alia: The amount requested in the Disputed Notice exceeded the Capital Commitment made by BPOPF to BOP. The Disputed Notice was not a Drawdown Notice as defined in the BOP Agreement.”

Peter Collins is of the view that the Disputed Notice gave insufficient notice to BPOPF. He sates in the letter that the BPOPF's Capital Commitment, as set out in the Deed of Adherence, was BWP500,000,000. Further stating that the total disbursed drawdowns from notices issued by CMB totalled some BWP470,000,000. As at the date of the Disputed Notice, BPOPF's undrawn Capital Commitment was therefore BWP30,000,000 or thereabouts.

“The total amount that the General Partner sought to draw down in terms of the Disputed Notice was BWP77,000,000.2 This exceeded the available Capital Commitment available. As noted above, the BOP Agreement prohibits drawdowns of amounts from any Partner in excess of their Capital Commitment. The Disputed Notice was therefore invalid because it purported to draw down more capital than was available.

There were discussions, in 2016, between BPOPF and CMB about BPOPF potentially increasing its capital commitment. BPOPF advised CMB, in a letter dated 22 November 2016, that BPOPF had allocated P380,000,000 to BOP but the allocation was expressly conditional upon receipt by BPOPF of a reconciliation of the funds drawn so far, proof of payment of 1% contribution by CMB and a full accounting for BPOPF's capital invested in the BOP Fund.

CMB never contributed the Limited Partner's 1% capital contributions that it had agreed to contribute3 nor did CMB provide the requested reconciliation and accounting. BPOPF's conditional allocation did not therefore ever become an actual commitment by virtue of failure of the suspensive conditions aforesaid. The Disputed Notice did not meet the definition of a Drawdown Notice contained in the BOP Agreement.4 As noted above, "Drawdown Notice" is defined as a notice in substantially the form of Schedule 5 to the BOP Agreement (the "Prescribed Form").

I have also reviewed the documentation relating to the purported removal of BPOPF by CMB as Limited Partner. The documentation reveals that on the 19 October 2017, CMB sent a letter to BPOPF, which purported to be a notice of default. CMB advised that it would proceed to declare BPOPF to be a Defaulting Limited Partner if BPOPF did not pay the Drawndown Amount set out in the Disputed Notice.

On 30 October 2017, BPOPF responded noting that the Disputed Notice was invalid and that BPOPF was therefore not in breach of its obligations under the BOP Agreement. On 28 November 2017, the Advisory Board of BOP exercised its powers under the BOP Agreement5 to remove CMB as the General Partner. Notice was given by BPOPF to CMB of said removal on 1 December 2017.

On 11 December 2017, CMB responded to BPOPF advising that BPOPF's interests in BOP had been sold on for BWP50,000,000.00. CMB did not name the party which had purchased that interest. I have since established that that the payment of P50,000,000 was made out of an account operated by CMB for BOP fiduciary business and not from a third party or from CMB’s own funds.

Peter Collins is of the view that the disposal was accordingly a sham and unlawful for these reasons and for the reasons stated in the agreement I entered into with BPOPF dated 8th August 2018. “You have seen this agreement and you will therefore have read the My decision to enter into the settlement agreement was taken after due deliberation over an extended period while the litigation in both the High Court and Court of Appeal was pending.

I had more than sufficient, objective, uncontradictable evidence at my disposal to come to the conclusion which I did. CMB’s prospects in the arbitration proceedings were not simply dismal, there were no prospects at all on the written demonstrable facts. Lastly, as you are aware, CMB has been now placed under provisional liquidation and the management and control of the affairs of CMB currently vests solely with the provisional liquidator. I suggest that any future enquiries relating to matters of CMB which you may have, be directed to the provisional liquidator,” reads an extended letter from Peter Collins.

BACKGROUND TO THE DISPUTE – ACCORDING TO CMB

“By way of background, BOP’s relationship with the BPOPF was terminated almost a year ago when it proved to be an unreliable partner, it having defaulted on its financial obligations to BOP and the companies that it invested in. The BPOPF’s default had major consequences for a company which BOP intended to invest in, resulting in a loss of some 2000 jobs.

As a consequence of the BPOPF’s default, CMB was obliged in terms of the partnership agreement ruling at the time to seek a new limited partner, which it did, and disposed of the BPOPF’s stake to the highest bidder. The BPOPF waited months before heading to the High Court (on 27 December during the court recess of all things), claiming it was still a limited partner even though it had been paid for its share months prior and kept the money.

The court rejected the BPOPF’s case and pointed out it was supposed to enter arbitration. The BPOPF then waited months again before going the arbitration route, in the interim pushing a massive defamatory media campaign against CMB and working hand in glove with its co-conspirators NBFIRA and Bona Life. Bona Life, which is a company BOP / CMB rescued from insolvency, had blown its capital and wanted more money from the BPOPF.

Thus it found a willing partner in the BPOPF to wage its defamatory war, having been promised a new nest egg in return. Prior to Bona’s management ditching CMB in favour of the BPOPF, CMB had raised numerous awkward governance questions with Bona which no doubt sparked off Bona’s campaign against CMB.

Bona had no “dirt” on CMB, so it made numerous false and defamatory allegations against a CMB sister company (CMBF1), which was not regulated by NBFIRA, working closely with Collins (who was at that point not statutory manager but simply a legal advisor on a deal CMB attempted to broker between CMBF1 and Bona. NBFIRA used Bona’s false claims as an excuse to take over the running of CMB.

All of Bona’s claims were proven to be false. However, the triumvirate succeeded in getting the matter before court. Unsurprisingly, the High Court threw out their case with disdain, but in a peculiar twist, the Appeal Court with ruled in favour of NBFIRA without any lawyers from CMB being present to present their case and delivered its judgment in a matter of days.

Thus NBFIRA (and the BPOPF) was able to assume control over CMB using Collins as statutory manager. In the roughly four weeks that CMB was under statutory management, Collins tossed out the arbitration process (which would have resulted in the true facts being made a matter of record) and entered into a flimsy “settlement agreement” with the BPOPF in terms of which he sought to reverse the sale of the BPOPF’s interest in BOP.

The settlement “agreement” is not worth the paper it is written on. It is an “agreement” between two parties that are not party to, or signatories to, any the legal agreements that underpin BOP. By way of background, CMB was removed by the BOP Advisory Board as the general partner of BOP in mid-January (prior to the commencement of NBFIRA’s shenanigans relating to statutory management). A consequence of that was the automatic cancellation of the BOP partnership agreement and the replacement with a new partnership agreement – in other words, the contracts that the BPOPF was party to no longer exist – and have not for some considerable time.

Thus, Collins, who deliberately chose not to verify this, was unable to reverse the previous contracted sale simply because he had no locus standi to do so. Further, in terms of the settlement “agreement”” the BPOPF has attempted to return the funds it received to the buyer – however the buyer (and new limited partner) has rejected the offer to return the funds and thus remains the lawful limited partner of the BOP.

(For more information please see attached a notice directed to the BPOPF’s lawyers in this regard.) Consequently, neither the BPOPF (nor its company Viltry (Pty) Ltd), have any legal standing with BOP and by extension yourself. They are not entitled to demand, or request, any information from yourself, or to demand, or request and particular action from yourself at all.

For Viltry (or the BPOPF) to attain any legal standing they are required in law to seek declaratory relief from the High Court confirming that their actions and the actions of Collins are valid. Understandably, despite this having been pointed out to them, they have not sought the declaratory relief as they know they will lose – they have no case whatsoever. They are instead again relying on aggressive bullying tactics and their defamatory media campaign to try to gain by deception that which they could not obtain through legal means.

Please be advised that as BOP is a major shareholder in your company, it takes a dim view of the actions of the BPOPF (and Vlitry) and all necessary steps will be taken to safeguard the interests of BOP and yourself. You are requested not to assist the BPOPF nor Viltry in its fraudulent attempt to highjack BOP and its assets. Factually, the BOP is in the process of being dissolved and you will be contacted in due course by the entity appointed for this process for further guidance.