| Fri 25 Jul 2003, 17:17 | | Notice Of General Meeting And Update To Shareholde |
|
Ec-hold Limited - Notice Of General Meeting And Update To Shareholders
Release Date: 25/07/2003 17:05:01 Code(s): ECH
EC-Hold Limited - Notice Of General Meeting And Update To Shareholders
EC-Hold Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/020093/06)
Share code: ECH ISIN: ZAE000016705
("EC-Hold" or "the Company")
NOTICE OF GENERAL MEETING AND UPDATE TO SHAREHOLDERS
1. Introduction
Brait Sponsors (Proprietary) Limited is authorised to announce that EC-Hold,
on 30 June 2003, was requisitioned by certain minority shareholders of EC-Hold,
being Republic Nominees (Proprietary) Limited and Standard Bank Nominees
(Proprietary) Limited (collectively referred to as "the requisitioning
shareholders") to convene a general meeting of EC-Hold shareholders in terms of
section 181(1)(a) of the Companies Act, Act 61 of 1973, as amended ("the Act").
In particular, the requisitioning shareholders requisitioned EC-Hold to put
ordinary resolutions to EC-Hold shareholders in a general meeting regarding:
* the proposed appointment of PricewaterhouseCoopers Inc. to conduct a forensic
audit and investigation;
* the proposed disclosure of:
- the rationale and details of an investment with MGX Holdings Limited ("MGX");
and
- the particulars of dealings between EC-Hold and MGX during the period 11
October 1999 to 27 June 2003;
* a proposal for future proceedings by EC-Hold against MGX; and
* a proposal for future proceedings by EC-Hold against current and former
directors of EC-Hold relative to any investment of surplus funds with MGX,
collectively referred to as "the proposed resolutions".
2. General meeting
In order to comply with section 181 of the Act, the Board of directors ("the
Board") of EC-Hold has prepared a circular containing, inter alia, the proposed
resolutions. The circular will be posted to shareholders on or about Wednesday,
30 July 2003. The general meeting of shareholders is convened to be held at
09:00 on Thursday, 28 August 2003 at the registered office of EC-Hold, MGX
House, 22 Milkyway Avenue, Linbro Business Park, Linbro Park, Sandton, 2065, for
the purpose of considering and, if deemed fit, passing with or without
modification, the ordinary resolutions contained in a notice of general meeting,
forming part of the circular. A form of proxy will also be provided for
shareholders who are unable to attend the general meeting. Duly completed forms
of proxy must be received by the transfer secretaries of EC-Hold, Computershare
Limited by no later than 09:00 on Tuesday, 26 August 2003.
3. Opinion of the Board
The Board has considered the proposed ordinary resolutions and is of the view
that the requisitioning shareholders have not adequately considered the loan
account relationships between the MGX group and the EC-Hold group, as fully
disclosed in the audited accounts of EC-Hold at 30 June 2002. These reflect
that the EC-Hold group was a net debtor of the MGX group at that date. In the
opinion of the Board, these facts make the proposed ordinary resolutions
meaningless.
In addition, the ordinary resolutions purport to transfer management of EC-
Hold from the Board to the shareholders. Accordingly, if they were passed, they
would be regarded by the Board, at best, as advisory resolutions which are not
binding on the Board.
In these circumstances, but in the interest of transparency, Webber Wentzel
Bowens ("WWB"), on instructions of the Board, invited the requisitioning
shareholders to request whatever detail information they required from EC-Hold.
To the extent appropriate, taking into account the applicable regulatory
requirements and in consultation with EC-Hold"s auditors, EC-Hold would make
this information available to the requisitioning shareholders and to all
shareholders. This process would have avoided the costs of preparation of an
unnecessary circular and of convening the general meeting. However, this
proposal was declined by Werksmans Attorneys on behalf of the requisitioning
shareholders. Accordingly, as requisitioned, the Board has proceeded to convene
the general meeting.
4. Financial relationship with MGX
4.1 At the date of the last audited accounts, namely 30 June 2002 there was a
net loan of R7,5 million owing by the EC-Hold group to the MGX group. This was
made up as follows:
Rand million
MGX subsidiary loan to EC-Hold subsidiary 8,5
MGX Loan to EC-Hold 10,9
Total 19,4
EC-Hold loan to MGX 11,9
Net EC-Hold group debt to MGX group 7,5
4.2 The loan balances have been disclosed in the 30 June 2002 audited financial
statements of EC-Hold, with specific reference to notes 8 and 15 in the annual
financial statements.
4.3 At 30 June 2003, the unaudited accounts continue to reflect EC-Hold as a
debtor of MGX.
5. Disposal of businesses
The following disposals have been concluded in the past six months:
5.1 The shares in Sun Botswana (Pty) Limited have been sold for US$1 which has
been received in cash. Simultaneously with, and as one indivisible transaction,
an amount of US$740,000 was paid by Sun Botswana (Pty) Limited in reduction of
MGX"s loan account in this EC-Hold subsidiary. The purchaser was Anthony
Duckworth, the minority shareholder in Sun Botswana (Pty) Limited.
5.2 A disposal agreement has been concluded for the sale of the business of
Magic, a division of SMC Electronic Commerce, for the sum of R2 million to
former directors of EC-Hold, Messrs Amir Lubashevsky and Tzvi Appel. Press
reports have suggested that a former MGX Chief Executive Officer, Mr. Chris
Hills, was one of the purchasers. Mr. Hills was not a party to the agreement and
the Board has no knowledge of his involvement.
6. Operations and investments
6.1 The Company continues to own:
* 70% of Barlow Communications, a distributor of Radcom network diagnostic
equipment; and
* SMC Electronic Commerce, a developer and supplier of document management
solutions.
6.2 The Company has minority investments in:
* Correlate Technologies (USA);
* Connect One (Israel);
* Exsol Europe (Holland); and
* Intervate Technologies (SA).
6.3 The Board is considering offers for certain of these interests.
7. Trading update
Shareholders are advised that EC-Hold is expected to make a loss for the year
ended 30 June 2003.
8. Solvency
The Company has requested MGX to consider subordinating its loan account at
30 June 2003 to the extent that may be necessary once the audited figures are
available, to restore the EC-Hold group to solvency should there be a deficit at
that date. MGX is considering this request.
9. JSE Securities Exchange South Africa ("JSE") Listings Requirements -
Corporate Governance
9.1 MGX is a significant shareholder in EC-Hold with 43 154 000 shares
representing 41,48% of the issued share capital in
EC-Hold. MGX, since 1 July 2001, also acquired a further 43 165 501 shares,
details of which will be set out in the circular.
9.2 Currently the Company shareholder profile does not meet the spread
requirements for listing in the Development Capital Market sector of the JSE
lists. The Board is considering how to address this matter and will put forward
proposals in due course to the JSE in this regard.
9.3 Pursuant to the resignation of Messrs P H Flack and A D Moffat from the
Board during June, there are only two remaining Board members. The Company is
considering new appointments in order to increase the Board members to at least
four directors in order to comply, inter alia, with governance recommendations
of the King II Report. Shareholders will be advised accordingly.
9.4 The Company is in the process of appointing Messrs Deloitte & Touche as its
auditors.
10. Further cautionary announcement
Shareholders have been advised of the interaction between MGX, The Mandy
Rebecca Price Trust and the Securities Regulation Panel ("SRP") relating to a
possible offer to certain of the shareholders of EC-Hold.
The Company has been advised that MGX intends to actively engage with the SRP
with a view to achieving an appropriate settlement which may form part of the
court sanctioned restructure of MGX to be proposed to its shareholders and
creditors shortly.
Therefore, shareholders are referred to the previous cautionary announcements
of 10 July 2003, 19 May 2003 and 31 March 2003. MGX is at present considering
its alternative courses of action that could be taken as a result of the SRP
ruling of 19 March 2002. Accordingly, EC-Hold shareholders are advised to
continue to exercise caution when dealing in their shares until a further
announcement is made.
Sandton
25 July 2003
Sponsor
Brait Sponsors (Proprietary) Limited
(Registration number 2000/031069/07)
Corporate advisor
BRAIT
Legal advisor to EC-Hold
WEBBER WENTZEL BOWENS
