ZSE reverses African Sun/Dawn deal

HARARE - The Zimbabwe Stock Exchange (ZSE) has reversed a $3,9 million transaction between African Sun Limited (ASL) and Dawn Properties Limited (DPL) after the two companies flouted listing regulations.

This was after ASL and DPL — both subsidiaries of Brainworks Capital Management (Brainworks) — had entered into a transaction wherein a facility from a local bank had been secured by fixed property valued at $3,9 million owned by the property arm. The facility was meant to refinance a historical loan that was used in soft refurbishment of hotels owned by DPL.

ASL company secretary Venon Musimbe said in so doing the directors had acted with the knowledge that this was within the directors borrowing powers as provided for in the Articles of Association.

“Furthermore, this assumption was perhaps even more so given the fact that the security of $3,9 million which had been provided by DPL was relatively small with regards to the size of the balance sheet of DPL and all pertinent board processes had been adhered to.

“Regrettably, regulatory processes were overlooked and specifically the requirements of section 10,2 of the Listings Requirements were not adhered to and the security had to be varied and the transaction with DPL reversed,” he said.

Section 10,2 of the listing requirements states that if a listed company — or any of its subsidiaries — proposes to enter into a related party transaction, the listed company must consult the committee at an early stage.

According to the ZSE rules, if the committee considers the related party to have a significant interest in, or influence over the related party transaction, it may, at its sole discretion, impose the requirements set out in paragraphs 10,4 and 10,5.

“The relevant draft contract must be supplied to the committee, if requested,” the rules say.

Meanwhile, the hospitality group’s shareholders will meet at an annual general meeting June 30, 2017 to receive and adopt the financial statements for the period ended December 31, 2016, together with the report of the directors and auditors therein.

Shareholders are also expected to appoint directors, approve auditor’s remuneration and directors’ fees as well as ratification of the Brainworks service level agreement.

“The purpose of the agreement is to document in writing that Brainworks supports the operations of the company, and has done so on a regular basis since April 2015.

“This agreement formalises the terms under which Brainworks shall continue to provide services to the company and includes the financial terms and remuneration on which such support services shall be provided.

“The services entailed include advisory services, and in commercial, financial and administrative management technique as well as to a greater or lesser extent strategic planning, legal, tax, IT, treasury, insurance, risk management, and investor relations,” Musimbe explained.

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