By Fifi Peters and Monique Vanek
Old Mutual could have avoided its costly legal battle with sacked CEO Peter
Moyo if it had explored more options to manage the conflict of interest with Moyo
and his company NMT Capital – the issue at the heart of the dismissal. Court
papers claim Old Mutual could have taken advantage of its preference share
subscription (PSS) agreement with the investment company, formerly known as
Amabubesi, which could have circumnavigated the dispute.
The means were there according to court papers. In 2004/2005 when Old
Mutual, as part of its black
economic empowerment objectives, became a 20 per cent
shareholder in NMT Capital it ensured that it contractually protected itself over
its R46 million preference share capital funding to the investment company.
Court documents show that under this preference share subscription (PSS)
agreement, no dividends were allowed to be paid on ordinary shares if the
preference share debt had not been settled. This issue was at the centre of the
conflict of interest argument.
The PSS agreement also provided Old Mutual with the option to convert
the preference shares into fully paid ordinary shares of equivalent value if
NMT Capital failed to repay the preference share funding by the redemption
Another option was that the PSS agreement allowed South Africa’s second largest insurer to receive interest on all amounts owing, if the preference dividend was not paid, once the company had redeemed the preference shares.
Instead, Old Mutual agreed to redemption extensions in 2010, 2013 and 2017. In 2018 the company requested another extension. According to a statement from NMT Capital it entered into talks with Old Mutual over the redemption extension with little success.
In the statement the majority black owned investment company claims:
“NMT Capital had started discussions with Old Mutual aimed at extending
the redemption date of the preference shares. There was also a proposal sent to
that effect. These discussions were ongoing and Old Mutual was aware at that
stage that NMT Capital did not intend to redeem the preference shares but
preferred an extension of the redemption date.
“For its part, NMT Capital has on several occasions made attempts to
meet with Old Mutual representatives to iron out these issues towards finding
common ground. This includes a meeting with the Chairman of Old Mutual, Mr.
Trevor Manuel, which took place on the 30th of May 2018.”
The background to all of this tells its own story. Instead of Old Mutual
taking up the options made available to it, through the PSS agreement, it fired
Moyo in June 2019, mainly, for his role in chairing an NMT Capital annual
meeting on June 4 2018.At this meeting the black economic empowerment group
approved the payment of ordinary dividends ahead of settling its preference
share debt payments.
Old Mutual said it held three sub-committee meetings to discuss the NMT
matters prior to firing Moyo.
Moyo claims the board was driven by improper motives when firing him and
that his dismissal followed protective disclosures he made about Manuel. The High
Court ruled in favour of Moyo’s version of events on July 30. He is expected
back at work for the second time since the sacking this morning after winning
yet another court battle last week.
In his founding judgement, presiding Judge Brian Mashile said:
“The Respondents (Old Mutual)
would let this court believe that the issue concerning the Applicant’s (Moyo)
conflict of interest arose well before he made the disclosures. In short this
is factually misguided. The Respondents might have been holding meetings as
early as January 2019 but it was not until retrieval of certain documents from
archives of NMT during or at the end of April that they learned of the alleged
conflict. The discovery of the alleged conflict therefore came after the disclosures.
For this reason, the connection is apparent – disclosure followed by alleged
conflict and then occupational detriment.”
Old Mutual did not respond to questions about why it approved NMT’s
redemption extensions several times. Also, questions as to why it did not take
up its options to convert the then outstanding preference debt from NMT into
ordinary dividends. Nor did it respond to questions on why the May 2018 talks
failed to reach a settlement and whether Moyo knew this.
Conflict of interest
Aside from the PSS agreement, Old Mutual had other options to deal with
Moyo’s conflict of interest, according to court papers.
They include: an independent disciplinary hearing; asking Moyo to resign
as a director from the NMT Group; divesting his interests in the company into a
blind trust, or as a last resort, arbitration.
The job of managing any conflict appears to be at Manuel’s door.
“Any conflict of interest resulting from the executive’s position as
non-executive director of NMT will be dealt with by the chairperson of the
company and/or in terms of clause 25.2 of the executive’s employment contract,”
the contract says.
Section 25.2 suggests arbitration by a private firm to resolve an
impasse that would normally be handled by The Commission for Conciliation,
Mediation and Arbitration.
When asked why Manuel did not use all the options available to him to
manage Moyo’s conflict, Old Mutual did not comment. In response to a question
about why it invested in NMT Capital and the Group to start with, Old Mutual’s
chief of communications, Tabby Tsengiwe said:
“The history of
Old Mutual’s NMT investment is not relevant. Old Mutual’s concerns relate
to subsequent management by Mr Moyo of his conflict of interest with NMT and
among others, that ordinary dividends were paid out while OM [Old Mutual] should
have been paid first as a preferential shareholder.”
Following the litigation and hullabaloo over the payment of the
preference share debt NMT Capital has settled the preference share loan it
received. Asked how much the holding company NMT Group still owes, Old
Mutual acting CEO, Iain Williamson said the insurer’s
exposure was around R290m.Old Mutual has said it is negotiating to exit this