EFFORTS to block Tetrad Investment Bank (TIB)’s extraordinary general meeting (EGM) by one of its directors, Dimitrios Divaris, have flopped after the High Court struck off the roll his court application.
Divaris is the executor of the estate of his late mother Vassilliki Divaris, who was a modelling and fashion guru. Vassilliki owned 454 890 minority shares in Tetrad.
In December last year, another High Court judge, Pisirayi Kwenda, had granted Divaris interim relief that the EGM should not go ahead.
He said if the EGM proceeded, its resolutions would cause irreparable harm to Divaris’ substantial financial interests.
“The Extraordinary General Meeting (EGM) for Tetrad Investment Bank scheduled for 16th December 2022 shall not proceed and shall only proceed subject to new notices in terms of the law,” Kwenda said.
However, on 28 June 2023, Tetrad published a notice of an EGM.
The EGM was scheduled to take place on 20 July 2023 and its purpose was to procure shareholder approval to change the nature of the company`s business.
Tetrad`s directors had resolved to surrender the bank`s licence and set sights on venturing into property and real estate.
Alarmed by this development, Divaris rushed to court with an urgent chamber application to stop the meeting.
To him, the purported transformation of Tetrad from a bank to a realtor was unpalatably irrational.
When he rushed to court, Divaris prayed for a prohibitory interdict staying the holding of the EGM.
He intended to put a stop to all that.
In addition, he attacked the same directors on other allegations of corporate misconduct.
Divaris, among other arguments, contended that the EGM improperly pre-empted the finalisation of case number HCHC 82/23, this being an application he had filed in this court on 3 February 2023 seeking the placement of Tetrad under corporate rescue.
He had filed this application as an “affected person”, in terms of section 124 (1) of the Insolvency Act.
The application under HCHC 82-23 is still pending finalisation.
His present application was opposed with Andre Lourence Vermaak deposing an affidavit in the capacity of a director of Tetrad.
Tetrad was represented by its lawyer Hebert Mutasa.
Divaris’ attorney, Listen Zinyengere, argued that corporate rescue proceedings commenced the instant that application was filed under HCHC 82/23.
“The consequences of corporate rescue proceedings automatically kicked in,” he said.
Zinyengere said the consequence was the suspension from office (and resultant cessation of function) of Tetrad`s directors.
For that reason, the lawyer said Vermaak’s opposition to the present proceeding on behalf of Tetrad, was invalid.
He said Vermaak had no mandate to act in the capacity of director.
Tetrad, in response, argued that corporate rescue proceedings only started after an order to that effect was granted by the court.
High Court Justice Joseph Chilimbe found for Tetrad.
Chilimbe struck off Divaris’ application, ruling that there was no matter before him because of filing defects.
The court observed that corporate rescue commences in two main ways, and each method triggered its own formalities.
“Notwithstanding the clear guidance in Metallon Gold, Mr Mutasa for the respondent argued a contrary position.
“He urged the court to distinguish that authority. And with considerable vehemence too. He submitted that corporate rescue proceedings commenced, not when an application was filed, but when an order was granted. I drew neither comfort nor conviction from counsel`s argument. He proffered no supportive authority for his position,” said the judge.
Chilimbe said the law is clear that corporate rescue must be considered a process and not an event.
The judge concurred with Divaris that the process commences upon the filing of an application.
He said the troubled entity must be preserved at the earliest opportunity in order to accord the rescue practitioner the best possible chances of turning the entity round.
Chilimbe ruled: “I am satisfied that corporate rescue proceedings for Tetrad commenced on 3 February 2023 upon the filing of HCHC 82-23. This takes us to the residual issues on effect of rescue proceedings,” he said.
The judge however noted that during corporate rescue proceedings, no legal proceeding, including enforcement action, against the company, or in relation to any property belonging to the company, or lawfully in its possession, may be commenced or proceeded with in any forum.
“This provision is similarly clear. No legal proceedings may be instituted or sustained against an entity under rescue. This is an old, established rule. But that bar is not absolute…”
The judge said it became unnecessary to deal with the status of Tetrad`s directors.
Zinyengere had impugned the authority of Vermaak as a director or Tetrad.
Mutasa, in response, argued that the automatic suspension of directors upon the mere filing of an application created an absurdity.
In this regard, the judge concurred, stating that the company would be instantly plunged into a legal and administrative vacuum.
He ruled: “I do not have a proper application before me. What stands before me (and to borrow the observation in Chiwenga v Mubaiwa SC 86-20) is a matter burdened by ‘misapprehensions of the law’. It will be struck off the roll.
“It is therefore ordered that the application be and is hereby struck off the roll with each party bearing their own cost.”
Tetrad’s board of directors wanted to pass a resolution to convert the financial institution with an asset portfolio of about US$13 million into a property management company.
The institution retains significant residual value.
The EGM is contentious as the board wants to use it to change the bank into a property management company and entrench itself against shareholders’ will and interests.
Directors also want to remain in charge of the money-spinning property portfolio for personal benefits.
Shareholders want a new board appointed because they have not received a return on investment for eight years now.
The current management and board have not produced financials for three years, further angering shareholders.
There has been so much controversy which saw TIB former acting board chairperson Appollinaire Ndorukwigira, a prominent economist resigning.
In his resignation letter written to the board, dated 5 December 2023, Ndorukwigira said he quit because he strongly objected to the agenda of the upcoming EGM, particularly the proposal to transform the bank into a property management company.
“The meeting of the board which took place on 1 December 2022 at the Pavilion, St George’s College (Harare), refers. In that meeting, I did strongly object to the proposed agenda of the Extraordinary General Meeting of the company as well as the proposed draft resolution to recommend the surrender of the banking licence and the proposed conversion of Tetrad Investment Bank into a property management company,” Ndorukwigira said.
“As the records of the meeting would show, I did oppose that draft resolution on the basis that the proposed new business orientation is based on insufficient technical and financial data demonstrating the viability of the new property management company.
“The executive management has failed to produce a credible business plan that would clearly demonstrate that shareholders would be better off by adopting the property management business model. The documentation sent to shareholders does not show the type of activities to be undertaken to improve the revenues of the company, other than collection of rental income of the current property portfolio over the next five years.”
Ndorukwigira said as a result of the seemingly dodgy and self-serving proposal, he is opposed to the move to convert the bank to a property management company.
After the resignation of Ndorukwigira, a Harare-based Burundian economist who is ex-special adviser to the executive secretary of the African Capacity Building Foundation, the bank’s board now comprises Misheck Mpiwa Chiwayo, John Alexander Brydone Graham, Harry John Orphanides and Andre Lourence Vermaak, all Zimbabweans. — STAFF WRITER.