Tuesday, December 13, 2011
Sharemax:Liquidation averted ?
: Liquidation averted?
Not quite, say critics, who think the rescue scheme may not get past a court.
JOHANNESBURG - Sharemax investors have reportedly voted overwhelming in favour of a rescue scheme. The scheme aims to prevent the liquidation of syndication companies sold under the Sharemax banner.
All that remains is for a court to sanction the scheme. But some believe this won’t happen.
Approximately 35 000 investors, many of them elderly, have placed about R4.5bn in the various Sharemax schemes. Virtually all of these investors were acting on advice received from brokers who received generous commission from the sales.
One of the most outspoken critics of the rescue scheme’s process is Niki Vontas, CEO of listed property stock Bonatla. Bonatla once proposed its own rescue scheme for Sharemax, but subsequently walked away from the deal.
Vontas describes the Sharemax scheme as a “joke”. He says: “A competent judge will not validate such a ridiculous scheme.”
Vontas is no stranger to rescue schemes. His company successfully saved troubled Bluezone syndications from liquidation. The Bluezone syndications had already been provisionally liquidated, which makes the rescue all the more remarkable. Companies placed under provisional liquidation are almost always liquidated permanently.
It remains to be seen how successful Vontas’s Bluezone rescue will be, but most experts agree that there are few fates more damaging to property syndication investors than liquidation.
The Sharemax rescue plan has been led by corporate lawyer Connie Myburgh, who readers may remember for his aggressive defence of Garek, a scheme that cost its investors untold millions.
The scheme is not cheap; documents (click here to download) estimate the total cost at R11m, the bulk of which comprises legal fees. These fees are paid regardless of whether the scheme is successful. The fees are paid from those syndication schemes that have cash available, incurring further debt for those that don’t.
Vontas says that for the scheme to be properly put together, each company in the Sharemax stable should have voted separately. This was not the case; votes were pooled. Vontas also claims that shareholders were not given proper notice.
Chris de Beer, an attorney representing Sharemax investors, agrees that the process is flawed. He says that the rescue plan, if approved, will serve to legalise Sharemax’s illegal structure. His clients have instructed an advocate to attend court in a bid to prevent the scheme’s sanction.
De Beer has previously applied to the North Gauteng High Court for the judicial management of a handful of Sharemax syndication schemes. The matter is due to be heard on May 7 2012. However, De Beer concedes that if the Sharemax rescue scheme is sanctioned by the court, it would mean that his judicial management application is less likely to be successful.
De Beer says that it has never been his intention to liquidate the Sharemax syndication companies. “We just want to make sure a proper process is followed.”