The High Court has granted an order placing Bluthorn Fund Managers (BFM) in final liquidation, The Business Weekly & Review has established.
BFM has minority shareholders at 10 percent each while majority shareholding of 60 percent is held by Blu Thorn Procurement Solutions, which is 100 percent owned by Blu Thorn. Blu Thorn in turn is owned by Eune Engelbrecht (40 percent), Kelebogile Sibisibi (40 percent), and Henk J van der Merwe (20 percent).
Other companies which have shares in BFM are Prime Employees Benefit, Blu Thorn Procurement Holdings and Blu Thorn Holdings. Of all these companies, only Blu Thorn opposed the application for final liquidation of BFM brought by final liquidator and petitioner, Kopanang Thekiso.
Delivering his judgement, Justice Michael Leburu found that the insolvency of these minority companies which have shares in BFM “speaks for itself”. He also found that Blu Thorn Holdings “is indebted to BFM in the sum of P19, 60,286.95. The 2nd Respondent is indebted to BFM in the sum of P119, 606,000.00 and the Respondent (fourth) owes BFM P75, 969,825.16”.
The judge found that despite lawful demand, these minority companies had failed to repay the said debts. “I therefore determine that they are insolvent,” he intoned. “In terms of section 342 of the Companies Act, the trio should also be reinstated into the Register of companies.”
Regarding Engelbrecht’s claims that Blu Thorn should not be part of the liquidation proceedings, Justice Leburu said Blu Thorn was a beneficiary of an immovable property, namely Plot 124 Lion Park, purchased by the Prime Employees Benefit using BFM funds in the admitted sum of P9,985 844.06.
BFM, as a creditor of the Blu Thorn, therefore does not require permission to institute these proceeding to restore the 4th Respondent to the Register of Companies at CIPA. The judge agreed with Thekiso’s submission that all these minority companies should be liquidated as if they are one company.
“It is clear that funds invested on behalf of BFM were so intermingled and co-mixed with the business operations of the companies within the Group, such that it is impossible to determine which creditor’s money was used for which transaction and by which company,” said the judge.
“I also embrace the findings of the Statutory Manager wherein he stated that these companies are so closely related, such that transactions inter se the said companies were akin to “brothers and sisters sitting at a family table and exchanging money between themselves”. He said the liquidator’s report is equally demining in that transactions between these companies were not at arm’s length.
Therefore, the judge directed that all the respondents be placed under liquidation in terms of Section 369(b) of the Companies Act and ordered that the winding up of all the respondents proceed as if they were one company under the liquidated estate of BFM.
The order also directed the Master of the High Court to appoint Kopanang Thekiso as Liquidator of all the companies. Any action or proceedings that is pending in any court of law or about to be instituted against the consolidated estates shall be stayed and the assets of the consolidated estates shall form a common pool which shall be available to meet the claims of all unsecured creditors of the consolidated estate.
BFM was licensed by the Non-Banking Financial Institutions Regulatory Authority (NBFIRA) in 2016 to operate as a Collective Investment Undertaking (CIU) within the capital markets industry, having satisfied the licensing and legislative requirements.
However, the Authority, during its supervisory activities in May 2019, discovered that BFM was not fully compliant with the relevant financial services laws. It was further discovered that BFM channelled the majority of investor funds into one of its related companies, Prime Employee Benefits (Pty) Ltd (Prime).
A report before the High Court shows that district councils that had invested in Blu Thorn Fund (BFM) could have lost more than P250 million between 2018 and 2019. The list also includes trade unions and individuals. The report, compiled by Statutory Manager Peter Collins, shows that Gaborone City Council invested P20 million, Mogoditshane Sub-District Council P40 million, Ghanzi District Council P40 million, Kgalagadi District Council P50 million, South East Sub-District P45 million, Southern District Council P10 million, Tlokweng Sub-District Council P23 million, Hukuntsi Sub-District Council P5 million, Tonota Sub-District Council P10 million and Kanye District Council (sic) P6 million.
The most affected district councils are Letlhakeng Sub-District Council which had deposited P140 million, South East District that had deposited P100 million, and Mahalapye Sub-District Council that had deposited P70 million. Landboards across the country were not spared in sweep of the fraudulent investment scheme. The report shows that Malete Land Board had invested P13 million and Tlokweng Land Board P28 million.
The Botswana Sectors of Educators Trade Unions (BOSEUTU) had invested P16 million, Kgateng Development Trust P15 million, Botswana Institute for Development Policy (BIDPA) P3 million, while BOFESETE Funeral Scheme had invested P7 million. Individuals had invested more than P111 million collectively.
Collins’ report shows that there were five primary related parties in the BFM “family” of companies, namely Blu Thorn Fund Managers, Blu Thorn Procurement, B Thorn Pty Ltd, Blu Thorn Holdings, and Prime Employee Benefits.
The report says from a shareholding perspective, it emerged the same Engelbrecht, Sibisibi and van der Merwe jointly own all the shares in the real holding company, B Thorn, which owns the majority of shares in BFM. “These parties are so closely related that transactions between them are the equivalent of brothers and sister sitting at a family lunch table and passing money between themselves,” it says
“As will later be seen BFM was the recipient of all client/investor funds but instead of taking on the responsibility of abiding by the terms of its licence as a collective investment undertaking, it ‘invested’ the funds in its own unlicensed family companies.”
The report says BFM was engaged in banking business unlawfully. “It was taking deposits and lending on the proceeds for a margin,” it notes. “That is what banks do. To the extent that it may have been ‘investing’ rather than ‘lending on’ in some instances, its activities may be seen as management. But it held no licence for that activity either.
“It was licensed as a CIU but there is no trace of collectivised units capable of liquid disposal. Nothing was collectivized. To the contrary, each depositor entered into an individual depositing agreement for term repayment at agreed interest rates. That is banking.” The report says the total amount outstanding to depositors was in excess of P220 million (excluding interest). “Given the extraordinarily generous interest rates paid or promised to depositors by BFM, I would expect the real exposure to be in the region of P250 million,” says Collins’ report.