Dissent boils over at AGM
The CEO is not a director and three directors, including the chair, have not been confirmed by the shareholders
The drama at equipment manufacturer Ellies has all the hallmarks of one of the soap operas repeated interminably by Dstv (on which Ellies is now heavily reliant for much of its revenue).
From the outside it also looks like one of those old-fashioned African coups – elections are held, the president-for-life is not re-elected, the president ignores the election results.
The Ellies board, led by a few key recent appointments, has opted to ignore the wishes of most of its shareholders and rely on a littleknown section of the company’s memorandum of incorporation to secure the continued involvement of its lead independent director.
It has also opted to confirm the July 2018 appointment of the CEO, though the shareholders refused to confirm his appointment as an executive director.
The same shareholders are also challenging the validity of the mid-december reappointment of the chair and a second director. So, as of early January 2019, Ellies has a CEO who is not a director and three directors, including the chair, who have not been confirmed by the shareholders.
Needless to say, the shareholders, including founder and former long-serving CEO Ellie Salkow, are not taking this lying down.
The lawyers have been called in and, in early January, a case was lodged with the commercial court. The JSE is also looking into the matter.
All that Andre Visser, JSE general manager of issuer regulation, would say at this stage is that it is “a very unusual set of facts”.
One legal academic says he’s never seen anything like this before. “Section 66(4)(b) of the Companies Act says at least 50% of the directors must be elected by the shareholders. Deemed election is not election,” he says. Ellies now has five directors.
The first obvious signs of a winner-takes-all boardroom battle playing out at Ellies, which is struggling to develop new growth prospects in the face of a declining Multichoice, was the release of the results of the AGM held in early December.
However, for those who were watching, there were signs of trouble brewing in the weeks leading up to the meeting.
A spate of high-profile resignations earlier in 2018 would have set off some alarm bells and certainly contributed to the share’s 50% drop in value during the year. The share, which was trading at R6 five years ago, is now at 20c. Adrian Bock, who had held the position of CEO and CFO since November 2017 and was leading a strategy change, quit in June 2018 to return to the UK. Shaun Prithivirajh, who had been CEO of Glocell for two years, took over as Ellies
CEO in August.
In mid-august independent nonexecutive director Stephen Goldberg resigned and on September 1 Shoki Ralebepa was appointed to fill the gap.
This was followed a few weeks later by the appointment of Ian Russell as an independent nonexecutive director. In mid-october Chris Booysen was appointed CFO.
But the really big move came in midnovember when the board announced that Salkow was retiring as an employee but staying on the board as a nonexecutive director.
At that stage the board appointed independent nonexecutive director Fikile Mkhize as interim chair.
So, after six months of musical chairs the Ellies shareholders were faced with three new directors, including the CEO, and the appointment of an interim chair.
In a well-ordered corporate environment all of these appointments would have been put to shareholders at the next AGM. But Ellies was far from well-ordered and its AGM was scheduled for December 7, literally days away.
The meeting could not be delayed because the JSE requires a listed company to hold an AGM once in each calendar year.
It also meant there was not sufficient time to send amended AGM notices to shareholders that would include the two new board appointments. However, shareholders were asked to vote on the appointment of Prithivirajh as CEO and executive director, as well as the reappointment of Mkhize.
Amazingly, given all the boardroom changes and the near-critical state of the company, only 61% of the shareholders bothered to attend the meeting. Unsurprisingly, 53% of them voted against the crucial resolutions.
Prithivirajh was not elected as an executive director and Mkhize’s re-appointment was not confirmed.
The FM has been told, but could not confirm, that the opposition is being led by Salkow, who is apparently unhappy with the boardroom changes and the group’s new strategic plans. Salkow, who owns 18% of the company he founded 40 years ago to sell television aerials, was indisposed this week and could not be contacted by the FM.
Mazi Capital, which with 29% is the single