Issued to Investors and other Interested and Affected Parties
The Board of the Sharemax related companies currently operating under the directive of the South African Reserve Bank (the SARB), including the newly appointed non executive directors, has been meeting regularly regarding the affairs of the companies (excluding Sharemax Investments) under SARB directives (the companies), and after due consideration and having taken into account the current status of the affairs of the companies, the board has decided that the structuring and proposing of a Scheme of Arrangement Process, in terms of the provisions of Section 311 of the Companies Act, be embarked upon.
The board is of the view that the Scheme Process will provide the best solution and protection to investors and other interested parties, while simultaneously addressing and rectifying any contraventions of the Banks Act, if accepted and successfully implemented. In addition, the Scheme Process will effectively “ring fence” the companies and the various rights and interests of the companies, investors and interested parties, and provide certainty and clarity as far as such rights and interested are concerned, and should make it easier to securing third party funding, where needed.
The Scheme Process will entail a formal proposal for the restructuring of the affairs of the companies, to be presented to the High Court, and after the approval of the Court, the proposal will be put to all interested and affected parties for their approval, where after the Court will be requested to finally sanction the proposal to become effective. The board has already instructed a professional team to commence the Scheme Process, which should be ready to be presented to the Court before the end of February 2011, followed by the approval process and the proposal becoming effective towards the end of March 2011. The aforesaid timetable may however change, depending on the availability and processing of information and the timing remains at the discretion of the board. The board is however committed to finalising this process as expeditiously as possible.
Details of the progress of the Scheme Process will be communicated regularly.
Investors are advised to note that although it acts, independently, as a board, and is in full control of the companies and their affairs, the board is legally and duty bound at all times to act in consultation with the SARB appointed statutory managers (the managers) and to obtain approval from them in regard to all actions of the board relating to its dealings with assets of the companies. Apart from the above, no third party has any authority or mandate in regard to any aspects of the companies and their affairs.
Since becoming functional, the board has been collecting and analysing information relating to the companies under its control. It is clear to the board that the relationships between the different companies and interested third parties are exceptionally complicated with various potential external and internal claims and counterclaims. The actual status of the various rights, interests and obligations of the companies and interested parties are, in instances, equally complex and in certain instances, uncertain.
As a result of these complexities, a simple and speedy solution to the numerous complex issues is practically impossible. In addition, the board has a duty to consider the SARB directives and to seek solutions to eliminate any contraventions of the Banks Act and to ensure that the businesses of the companies continue in a legitimate manner. These considerations, in themselves, add to the complexities.
It is important to note that the board believes that the directive of the SARB may provide some protection against legal or other actions potentially instituted by third parties. The board will remain vigilant in the defence of actions which could impact negatively on the aforesaid interests.
The board has noted criticism from some quarters as to a perceived lack of communication and progress. The board realises the need to communicate to affected parties and to provide as much information as possible. The board remains resolute in its commitment to communication, transparency and a speedy resolution. All communication will be mandated and released by the board after due consideration of all facts and circumstances.
In addition, the board is also required to act in consultation with and provide regular feedback to the managers, in order to satisfy the Registrar of Banks as to progress from time to time. The information provided to affected parties needs to take account of the communication and views of the managers and the board will ensure that this process is duly followed.
A brief status report:
· The Villa
A number of proposals regarding the Villa have been presented to the board. The board is of the opinion that none of the proposals provide a comprehensive workable solution thus far. The board was also approached by a group with a proposal to secure further funding from existing investors to “shelter” the Villa. Although such a proposal may be considered once the Scheme Process has been implemented, the board is of the view that such a proposal is unworkable in the current environment and may contravene the SARB directive. The board advises investors to plan for no income from their Villa investments for a considerable time and to plan for a possible capital loss, in the event of the development not being completed.
· Zambezi
After the arbitration decision on 6 December 2010, a further amount of R64.6 million needs to be paid to the developer, for which guarantees need to be provided. Such funding is unlikely to be secured unless the Scheme Process can create a framework which can accommodate the raising of the necessary funds. The board advises investors to plan for reduced income from their Zambezi investments with the possibility of an eventual capital loss, should the property be sold prematurely.
· Frontier Investments
The board advises investors that the day to day administration of the companies is currently conducted by Frontier Investments (Pty) Ltd, a wholly owned subsidiary of Sharemax Investments (Pty) Ltd, the latter company being one of the companies under directive of the SARB. This arrangement was concluded prior to the board being restructured. In order to ensure continuity of effective administration, the board will for the immediate future, abide by this arrangement. It is understood that the arrangement will in time be revisited.
· More information
The board is in the process of preparing short summaries of the status of all the companies, which will be provided on the website, www.goob.co.za/mediaupdate/htm currently being constructed. These summaries are unaudited and incomplete, but in the interest of transparency the board decided to release the information, which information is to be considered with caution and is subject to review and adjustment at the discretion of the board. Investors are advised to adjust their financial expectations accordingly.
· Interest of investors
The board reiterates that its priorities are to comply as a matter of urgency with the directive of the SARB, to protect the interests of investors to the best ability of the board, given the circumstances, and in order to reach an amicable solution to the challenges that face the companies.
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