On Thursday afternoon, Judge Igna Stretch told the three parties involved in the urgent application that she would announce her decision this morning.
Her decision has far-reaching implications for a section of the Companies Act that has long needed clarifying. It will also deal with the first yet "oppression of minorities" charge brought against a listed company in terms of the Companies Act of 2008.
At the heart of the legal battle is whether a block of dissenting shareholders (holding about 11% of Sovereign’s shares) has the right to vote at Tuesday’s meeting. The Sovereign board has enforced an aggressive interpretation of "appraisal" rights that has resulted in the indefinite suspension of this bloc’s ability to exercise their rights as shareholders.
Appraisal rights allow shareholders unhappy with a company’s plans to apply to be bought out at "fair value", after which they no longer have shareholder rights.
The Sovereign board says the dissenting bloc of shareholders gave up their shareholder rights when they applied for and were granted appraisal rights ahead of a meeting on January 14 and so are barred from Tuesday’s meeting.
The dissenters, most of whom are linked to competitor Country Bird, claim their appraisal rights have lapsed, as Sovereign has abandoned the proposals put to shareholders at the January meeting. These shareholders applied to the high court to have Tuesday’s meeting postponed until their rights as shareholders are re-established.
Adding to the tension, just days before last week’s urgent high court action, Albie Cilliers, a dissenting shareholder who is independent of the Country Bird bloc applied to intervene in the case. Cilliers contends that the Sovereign board’s refusal to allow him to vote at Tuesday’s meeting is oppressive and an abuse of his rights. This is the first such case brought in terms of the 2008 Companies Act.
The January meeting was called to approve a proposal that would have introduced black economic empowerment (BEE) shareholders and aligned them with an executive share scheme in a controlling 28% voting bloc. The proposal also involved buying back 10% of the company’s shares at R8.50 each.
A buyback of more than 5% is deemed an expropriation and automatically triggers appraisal rights for dissenting shareholders.
When the results of the meeting made it clear Sovereign was faced with a steeper-than-expected bill (for the 10% buyback, as well as the 11% dissenters who would have to be paid out a "fair value") it set aside the results of the meeting and abandoned the scheme.
Tuesday’s meeting was called to vote on a revised proposal, which is the same one put to shareholders in January, except the buyback is reduced to 5%.
Cilliers says once the appraisal rights are revoked, his shareholder rights are re-established, and he should be allowed to vote. This is why he is calling for delaying the part of the meeting voting on the resolutions relating to the BEE and executive share schemes.
The Sovereign board approached the Competition Tribunal last week in a bid to stymie attempts by the Country Bird-aligned dissenting shareholders to re-instate their rights and/or acquire additional Sovereign shares on the grounds they were competitors and such action could be deemed a merger. The tribunal dismissed the application with costs.
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