The proceedings of Letshego Holdings’ much anticipated AGM on a chilly Thursday afternoon a fortnight ago kicked off in a cold sweat. A good 40 minutes was dedicated to the group’s legal advisor to move from one shareholder to another marking a register. The purpose of this, rightfully, was to confirm that indeed all callers in on the meeting and on the edge of their seats were shareholders of the group. That done, a while later tempers flared – the first cause of disagreement being the voting process that Letshego had adopted for this year’s AGM.
A shareholder who cannot/will not attend is supposed to complete a proxy form and submit it before the meeting. The proxies will then be counted as a part of the votes. However, if they are in attendance, they vote during the meeting by “raising” their hand for or against.
At the meeting, a legal advisor representing Letshego advised that the proxy form is not a vote but sets out how a vote should be cast at a meeting and the voting has to be cast at a meeting. He explained that if a shareholder cannot attend the meeting, the chairman of the company is also authorised to exercise the vote as set out and instructed in the proxy form. The crux of this explanation was that while a proxy form is filled out, voting had to be cast at a meeting. In other words, for a vote to be counted, it has to be by ballot.
What sparked more confusion was that in terms the constitution of the company, according to the legal advisor, every shareholder is entitled to one vote for every one share. When shareholders recorded their votes, the company Secretary and scrutinisers count according to as many votes as shares they hold. So at the end of the day, the advisor said the result will not be by a show of hands or one hand per shareholder but the votes will be recorded in line with the number of share rights. In addition to this bewilderment, the voting period was extended by two hours beyond the end of the meeting.
Observers have argued that it has never happened that votes are solely put through via ballot or that voting is allowed to continue after the AGM has concluded. Shareholders claimed that this change was not communicated. The loudest voice of one of the shareholders argued that it appeared that a simple process was being made overly complicated in order “to get the result they want”. The shareholder, who is a former top executive manager of the company, pointed out that this has never happened before at Letshego’s AGM and “it’s quite embarrassing that this is where we have come to”. “Shareholders have voted and the impression is that you are looking to find a way to get to a result you want rather that the results that shareholders are waiting for,” the shareholder argued.
The consensus was that the process was different before when proxies were received and all of them counted. A lot of what was happening was a change from previous processes and shareholders swore that they were not informed ahead of time.
But soon as the voting muddle was cleared, investors turned their minds to ‘excessive’ director fees. Shareholders indicated that the amount was close to $80 000 and “board members do not merit these fees”. “Why is the board so big? Why 11 members? It seems a ridiculous number,” one offshore investor charged. In reply, the legal advisor explained that in terms of the constitution, there is a minimum of four and a maximum of 15 directors. Letshego currently has 11. Further the legal advisor said (usually) the number shareholders can change and that boards evolve over a period of time and as the directors see the need for a skill and invite members.
According court records, in its engagement with investors and shareholders, three fund managers had previously raised concerns on board composition and remunerations. The elephant in the room was obviously the attempted hostile takeover by Bayport where Bayport would eventually gain a controlling stake in Letshego. Bayport had conducted a series of meaningful engagements with Sanlam, which is the controlling shareholder in the BIHL Group and had in principle received support from BIHL regarding the proposed acquisition of BIHL’s 28 percent shares in Letshego in exchange for issuance of new Bayport shares to BIHL. In addition to the BIHL transaction, Bayport would therefore, according to court files, look to acquire a minimum shareholding of approximately 22.1 percent from other remaining Letshego shareholders through a partial offer to achieve its desired minimum of 50.1 percent shareholding in Letshego.
From some shareholders’ understanding, the board had deliberated on this deal for months instead of throwing it out. One shareholder argued that this could only have happened when some of the board members were in favour of the offer. “Do they believe this was an unethical move by Sanlam at the time? Did they either speak to Lesetedi and Mr Van Heerde and did they try to reverse the offer? Do they think as the board they handled this well?,” the shareholder queried.
Gerrit van Heerde is Group CEO of Sanlam Emerging Markets (SEM) while Catherine Lesetedi is the CEO of the mighty BIHL. Phillip Odera, now board chair, said due diligence was actually conducted by Letshego on what was an EOI. “Obviously as independent members we execute our responsibility on the basis of what we believe is right and just for the shareholders,” Odera said. The Chairman argued that it was inaccurate to assert the process dragged on because of the vested interests. For his part, Van Heerde responded: “I discharged my duties and obligations as an independent non-executive director in terms of all transactions that came for board approval through the year.” The board member then said, “I can’t say more than that.”
Whereupon the CEO of BPOPF, Moemedi Malinda, put a question to Odera about whether Odera was not concerned with perceived conflict with regard to being part of the evaluation of the offer when it is “known you have a relationship with the CEO of Bayport”. “You went in as an independent director, but were you not concerned with that relationship being perceived as conflict?” Indeed Odera answered that he has known the CEO of Bayport but at no point in time was that “an issue of consideration whatsoever in the thinking and the actions taken either by the board or myself with regard to the issue at hand”.
Malinda then proceeded to ask Odera about the timing of his appointment as the chairman. Three directors had resigned ahead of the meeting, and Letshego had subsequently appointed Odera who would chair the AGM. “Would it not have been better to wait to have a fully constituted board to make the appointment?,” Malinda asked to which Odera responded: “When people get nominated and indeed appointed to the board, it is also subject to a process.” One of the things Odera said they were keen on was to ensure that they had some degree of continuity to ensure that everything that needed to be done was done by the company without any gaps. “That was principally what informed the decisions that took place.”
In fairness, shareholders felt that a substantive chair should have been made with a new fully constituted board. A related subject of dispute was the turnover of executives. In addition to departure of CEOs, board members resigned and left. Odera said he could not speak directly for other members who resigned for purely personal reasons. He stated that the “intention for those of us who have come to this board and remain part of the board to do everything, we have within our capacity to ensure that Letshego is a fully functioning and well-managed company with a board that takes roles seriously and a board that is able to conduct itself in a manner that befits the company and shareholders it represents”. “I can clearly state that the intention we have and we believe that we would be able to put our foot down and execute going forward,” he said.