Cell C, South Africa’s troubled mobile phone operator that is half-owned by JSE-listed Blue Label Telecoms, is being run by an illegal board of directors, Cell C’s empowerment partner alleges.
Claims are that 3C, the holding company of Cell C, has since last year been ‘fraudulently’ constituted.
Cell C was founded in November 2001 and 3C Telecommunications owned 100% of the mobile phone operator.
When Cell C was finally recapitalised in 2017 by Blue Label Telecoms, which ended up owning 45%, JSE and Nasdaq-listed Net1 UEPS Technologies took 15%, 3C Telecommunications reduced its 100% stake to 30%, and Cell C management and staff gained 10% shareholding.
3C Telecommunications is held 29.4% by the Employee Believe Trust, 45.6% by Saudi Oger and 25% by CellSaf.
A letter sent by CellSaf lawyers to the CEO of Cell C, Craigie Douglas Stevenson, which TechFinancials has seen, shows that the empowerment partner wanted to alert the CEO about ‘fraud’ committed on the operator through 3C.
In a complaint to CIPC, seen by TechFinancials, CellSaf argued that Serenta Lotz (Company Secretary of Cell C), Heystek-Irving, Carpenter and Strachan (lawyers at Adams and Adams Law Firm) have jointly or severally acted in a manner that is in consistent with the Companies Act.
In the letter to the Cell C Boss, CellSaf’s lawyers allege that “Heystek-Irving, who is not a director of the company” [3C and CellSaf] “has deliberately and knowingly without due authority attached her signature in a space reserved for a director of the company” [Zwelakhe Mankazana] “with the intention of falsifying the CIPC register”… [This] “clearly constitutes fraud and is inconsistent with the Companies Act”.
In its letter, CellSaf’s lawyers informed Cell C boss that on 9 April 2019, the CIPC reversed the appointment of the “illegal” 3C directors and reinstated the original directors of 3C who had been appointed between 1999 and up to the time when this instance of fraud was committed.
CellSaf argued that the impact of the fraud committed by Heysek-Irving (perhaps in cohorts with Lotz) on Cell C would likely lead to:
- all actions and/or resolutions taken by board members being declared null and void;
- all shareholder resolutions of Cell C taken during the tenure of those board members being open to legal challenges as there was no valid representation of 3C as a shareholder in Cell C;
- the board members facing criminal prosecution if there is evidence that they were party to the fraud themselves and proceeded to act as if they were legally appointed despite evidence to the contrary;
- in addition to criminal charges, such directors may be liable to being declared as delinquent directors in terms of the Companies;
- any third party, including the banks and other funders that contracted with Cell C on the basis of the resolutions passed by the illegally appointed board members, instituting proceedings to recover damages if they have suffered damages as a result of Cell C having contracted with them on the basis of the resolutions passed by the illegally constituted board; and
- banks and other funders withholding any additional funding to Cell C in light of clear blatant governance failures.
In the letter to Cell C Boss, Cellsaf’s lawyers advise: “We are in the process of instituting criminal charges, on behalf of our client, against those individuals involved and have set in motion the process to lay criminal charges with the South African Police Service.” – firstname.lastname@example.org
Also, read: Bowmans and PWC Continue Probing Troubled Cell C
For more, read: Is Blue Label Telecoms Headed for Delisting on the JSE?