The Steinhoff International accounting scandal got worse, not better, at its annual general meeting on Friday as shareholders, who were desperately looking for answers, ended it by questioning the legal validity of that very meeting.
A mountain of debt is engulfing the South African-born, Dutch-registered and international retail group. It owes 10.4 billion euros, or, more than 153 billion rand and it has no ability to say yet if it can pay it back as its accounts have been misstated since at least 2015 and the current financial numbers are unaudited – in other words – a guess.
The AGM, chaired by Heather Sonn, had to field a number of tough questions from some very annoyed European shareholders, especially the Germans, who lived up to their interrogative reputation.
Sonn opened the meeting by saying that the supervisory board, which was put in place after then group CEO Markus Jooste bailed, in December, realised that it was not being communicative as it would like to be. “But we are being like this on legal advice,” she said.
That mums-the-word attitude was illustrated by the group’s ban on photographs or any other recordings during the meeting. The media and guests were allowed, but they were not allowed to ask questions or interact with the shareholders.
What the board could say in its presentation is that a pattern of transactions over a number or years led to an overstatement in both profit and asset values. Shareholders could only interpret that as: the books were cooked.
For three hours the irate shareholders asked questions of the board ranging from potential conflict of interests (none, apparently), why the current board members should continue (because they want to sort out the mess), what was the plan to pay back the mountain of debt (Steinhoff has “an informal standstill with creditors” and will meet with them in May to outline a payment plan), and will shareholders be fully informed of the forensic investigation being conducted by auditing firm PriceWaterhouseCooopers (maybe, depending on legal issues that may arise from that).
Shareholders can expect the next set of properly audited annual results to be presented in January next year, after the investigation into what went wrong is completed.
The probe had examined more than 320,000 documents and 4.4 million records had been gathered in an attempt to determine what went wrong and who was culpable.
“We want to uncover the truth, show the world what has happened and prosecute any wrong doing,” Sonn told the polite, but irate shareholders. She also used an analogy of a burning building: when the fire was ablaze some run out, but others stay to help.
But that did little to help the fuming shareholders who wanted information so they could make proper investment decisions. “How can we make decisions with so little information,” one European shareholder wailed.
Another important question was whether or not the group has made provision for the raft of litigation it could soon be facing. This includes Dutch investors’ association VEB who initiated legal proceedings in Amsterdam in February for claims of declaratory relief for damages suffered by those who invested in Steinhof shares.
The group has, in return, filed a number of preliminary motions contesting the jurisdiction of the court and then requesting the court to issue third party contribution proceedings against the former CEO, Markus Jooste. In other words Steinhof is saying:
“We don’t believe this court has the right to hear and rule on this application, but if it does, then tell Mr Jooste to pay up too.”
There are a number of other court actions Steinhoff may be facing, although it has not received any legal papers yet. These include a similar class action suite in Germany and claims from sellers of businesses to the group.
So after all the resolutions were passed and the supervisory and management boards duly appointed, a shareholder representative cited chapter and verse from the Steinhoff articles of association that one of the matters that had to be discussed at an AGM was the company accounts, but this had not happened.
“In terms of Dutch law, if the matters in the company articles are not discussed at the AGM, then it has not been properly constituted,” he said.
The Steinhoff company secretary insisted that the meeting was valid saying it was being held “…and if that is not presented at the meeting, then it cannot be discussed.”
It seems shareholders are shuffling their papers in preparation for another legal challenge.
At the close of Johannesburg Stock Exchange trade on Friday, Steinhoff shares had risen five percentage points to 299 cents, a far cry from the heady all time high touched on March 24, 2016 of R95,04. DM
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