JSE on the scent of Accéntuate’s foxy dodge

Clumsy attempt to undercut shareholder activists at AGM may have the opposite effect

IN what appears to have been a ham-fisted attempt to neutralise a block of activist shareholders, the board of AltX-listed Accéntuate ended up disenfranchising a substantial group of “unaligned” shareholders at its recent AGM.

The outcome of the controversial action by Accéntuate’s board, which is being investigated by the JSE and Standard Bank Nominees, will have considerable implications for investors in small-cap companies.

“Big companies are concerned about their reputation, so they abide by the JSE’s regulations and any findings it might come to after an investigation, but the JSE’s only real sanction is to threaten delisting,” said one of the shareholders who had been prevented from voting his shares at the Accéntuate AGM.

“That might not be much of a threat for small companies, but it is a significant threat for the shareholders in those companies.”

Accéntuate supplies the construction industry with flooring and operates in industrial chemicals.

At the AGM, held on February 27, only 60% of the shares, equivalent to 74 million shares, were voted. This was an unusually low turnout for an Accéntuate AGM.

Its AGMs have been contentious and closely watched affairs for the past three years, since the arrival of a group of shareholder activists who acquired a 28% stake in the company believing they could help to generate greater earnings from its assets.

Ironically, the unprecedented action by the Accéntuate board may precipitate the sort of shareholder revolt that the shareholder activists have been hoping for. To date, their efforts to effect changes at the company have been thwarted by constant, expensive and time-consuming legal action.

Initially at the AGM it seemed the only block of shares that were in contention was the 14.5 million owned by Cron von Seidel, who is part of the group of activist shareholders. At the AGM, the chairman declared this entire block invalid because of issues around the proxies for nine million of them.

Adolf Potgieter, also one of the activist shareholders, said they had opted to use proxies this year to avoid the problems incurred with the Standard Bank letters of representation used at the AGM in December 2013. He said his activist grouping had a firm legal claim to all 29 million of the shares they voted and the disallowing of 14.5 million of them must be resolved by the JSE.

John Burke, head of the listings department at the JSE, confirmed the JSE’s concerns and that it was investigating the matter.

But this week it emerged that an additional 21 million shares that were the subject of a Standard Bank Nominees letter of representation were disallowed.

Accéntuate CEO Fred Platt dis- missed as “conspiracy theories” charges that the Standard Bankrelated shares were disallowed because the chairman believed they were owned by the activist shareholders.

“We were not able to reconcile Standard Bank’s 21 million shares with the register of shareholders. We asked Standard Bank ahead of the meeting to assist us, but they didn’t. At the meeting the chairman asked the representative from Standard Bank if he could reconcile their list with our register. When he couldn’t, the chairman put it to the meeting that the shares be disallowed. No one disagreed. Standard Bank subsequently sent a reconciliation, but there was nothing we could do at that stage,” said Platt.

Standard Bank Nominees is reported to be challenging Accéntuate’s action, which was described by one company secretary as highly unusual. “Usually if there is a problem with letters of representation, it’s sorted out before the AGM. Computershare [which manages Accéntuate’s share register] has got very good controls.”

The upshot of the decision to disallow 35.5 million shares, equivalent to 28.6% of the company, from voting at the AGM was that controversial special resolutions were passed by the necessary 75% vote.

The JSE reacted promptly by requesting the company not to implement any of the special resolutions until and unless the dispute about the disallowed shares had been resolved.

But the JSE’s action was not speedy enough to stop the company from paying its nonexecutive directors. The special resolution needed to do this had been blocked for three years. Within days of receiving his longawaited remuneration, the company’s chairman, Malesela Motlatla, resigned.