Accentuate activists set to appeal
THE long battle at AltX-listed flooring company Accentuate looks set to continue as aggrieved minority shareholders prepare to appeal against a recent high court ruling.
The minority shareholders, who paid about 60c a share to buy a 28% stake in the company in 2010, said one of their reasons for appealing was that the ruling set a precedent that would allow the directors of a company to decide who could vote at shareholder meetings.
Accentuate CEO Fred Platt, who described the activist minority shareholders as “destructive”, said they were entitled to appeal against the court’s decision.
“As far as I am concerned, we have a business to run. We will carry on — we have the support of the majority of shareholders.”
Platt said the activist shareholders had no experience in the industry and no value to add.
Adolf Potgieter, one of the activist shareholders, said that at both the 2013 and 2014 AGMs they voted their shares in line with the requirements set down by Strate, the central securities depository. However, on both occasions the Accentuate board prevented a large chunk of these shares from being voted on the grounds that the beneficial owner of the shares had not been disclosed.
Blocking the votes allowed controversial resolutions, such as nonexecutive directors’ pay, to be passed at the meetings. But on both occasions the board’s efforts to implement the resolutions were stymied.
Legal action by the minority shareholders after the 2013 AGM prevented Accentuate’s board from implementing that year’s resolutions. The minority shareholders wanted the high court to overturn the board’s decision to disallow their votes.
Earlier this year, following the unprecedented decision to disallow 35.5 million shares from voting, the JSE stepped in to stop Accentuate implementing the 2014 resolutions. Many of these dealt with the same issues covered by the 2013 resolutions.
Platt said that on all occasions the votes were disallowed because the parties could not disclose the beneficial shareholder as required by the Companies Act.
In mid-March, just days after the JSE’s action against Accentuate, the high court released its decision in the 2013 case. It ruled against the activist shareholders and awarded costs against them.
In a decision with major implications for the oversight of shareholders’ meetings, the court ruled: “The respondent acted properly in excluding the votes. The empowering legislation [the Companies Act] is peremptory. The applicants did not comply therewith. They also relied on the wrong legislation. Again, their reliance on the Strate directives was misconceived.
The directives do not apply, and in any event they cannot oust the application of the national legislation.”
Maria Vermaas, head of legal and regulatory at Strate, said Strate’s Central Securities Depository rules were aligned to the Companies Act. “The court case illustrates how votes may be rejected where the proxy is not signed by the correct registered shareholder but by another nominee in a lower tier of the holding chain.”
The court ruling gave Accentuate’s board authority to pay nonexecutive directors’ fees and register its new memorandum of incorporation, which they had already done.
The activists’ incentive to fight on will be influenced by their ability to exit the company without too significant a loss.
Although the share price has spiked above 100c occasionally over the past five years, it has generally stayed at about the 60c that the activists paid.