By Fifi Peters and Monique Vanek
Old Mutual could have avoided its costly legal battle with sacked CEO Peter Moyo if it had explored more options to manage the conflict of interest with Moyo and his company NMT Capital – the issue at the heart of the dismissal. Court papers claim Old Mutual could have taken advantage of its preference share subscription (PSS) agreement with the investment company, formerly known as Amabubesi, which could have circumnavigated the dispute.
Preference share subscription agreement
The means were there according to court papers. In 2004/2005 when Old Mutual, as part of its black economic empowerment objectives, became a 20 per cent shareholder in NMT Capital it ensured that it contractually protected itself over its R46 million preference share capital funding to the investment company.
Court documents show that under this preference share subscription (PSS) agreement, no dividends were allowed to be paid on ordinary shares if the preference share debt had not been settled. This issue was at the centre of the conflict of interest argument.
The PSS agreement also provided Old Mutual with the option to convert the preference shares into fully paid ordinary shares of equivalent value if NMT Capital failed to repay the preference share funding by the redemption date.
Another option was that the PSS agreement allowed South Africa’s second largest insurer to receive interest on all amounts owing, if the preference dividend was not paid, once the company had redeemed the preference shares.
Instead, Old Mutual agreed to redemption extensions in 2010, 2013 and 2017. In 2018 the company requested another extension. According to a statement from NMT Capital it entered into talks with Old Mutual over the redemption extension with little success.
In the statement the majority black owned investment company claims:
“NMT Capital had started discussions with Old Mutual aimed at extending the redemption date of the preference shares. There was also a proposal sent to that effect. These discussions were ongoing and Old Mutual was aware at that stage that NMT Capital did not intend to redeem the preference shares but preferred an extension of the redemption date.
“For its part, NMT Capital has on several occasions made attempts to meet with Old Mutual representatives to iron out these issues towards finding common ground. This includes a meeting with the Chairman of Old Mutual, Mr. Trevor Manuel, which took place on the 30th of May 2018.”
The background to all of this tells its own story. Instead of Old Mutual taking up the options made available to it, through the PSS agreement, it fired Moyo in June 2019, mainly, for his role in chairing an NMT Capital annual meeting on June 4 2018.At this meeting the black economic empowerment group approved the payment of ordinary dividends ahead of settling its preference share debt payments.
Old Mutual said it held three sub-committee meetings to discuss the NMT matters prior to firing Moyo.
Moyo claims the board was driven by improper motives when firing him and that his dismissal followed protective disclosures he made about Manuel. The High Court ruled in favour of Moyo’s version of events on July 30. He is expected back at work for the second time since the sacking this morning after winning yet another court battle last week.
In his founding judgement, presiding Judge Brian Mashile said:
“The Respondents (Old Mutual) would let this court believe that the issue concerning the Applicant’s (Moyo) conflict of interest arose well before he made the disclosures. In short this is factually misguided. The Respondents might have been holding meetings as early as January 2019 but it was not until retrieval of certain documents from archives of NMT during or at the end of April that they learned of the alleged conflict. The discovery of the alleged conflict therefore came after the disclosures. For this reason, the connection is apparent – disclosure followed by alleged conflict and then occupational detriment.”
Old Mutual did not respond to questions about why it approved NMT’s redemption extensions several times. Also, questions as to why it did not take up its options to convert the then outstanding preference debt from NMT into ordinary dividends. Nor did it respond to questions on why the May 2018 talks failed to reach a settlement and whether Moyo knew this.
Conflict of interest options
Aside from the PSS agreement, Old Mutual had other options to deal with Moyo’s conflict of interest, according to court papers.
They include: an independent disciplinary hearing; asking Moyo to resign as a director from the NMT Group; divesting his interests in the company into a blind trust, or as a last resort, arbitration.
The job of managing any conflict appears to be at Manuel’s door.
“Any conflict of interest resulting from the executive’s position as non-executive director of NMT will be dealt with by the chairperson of the company and/or in terms of clause 25.2 of the executive’s employment contract,” the contract says.
Section 25.2 suggests arbitration by a private firm to resolve an impasse that would normally be handled by The Commission for Conciliation, Mediation and Arbitration.
When asked why Manuel did not use all the options available to him to manage Moyo’s conflict, Old Mutual did not comment. In response to a question about why it invested in NMT Capital and the Group to start with, Old Mutual’s chief of communications, Tabby Tsengiwe said:
“The history of Old Mutual’s NMT investment is not relevant. Old Mutual’s concerns relate to subsequent management by Mr Moyo of his conflict of interest with NMT and among others, that ordinary dividends were paid out while OM [Old Mutual] should have been paid first as a preferential shareholder.”
Following the litigation and hullabaloo over the payment of the preference share debt NMT Capital has settled the preference share loan it received. Asked how much the holding company NMT Group still owes, Old Mutual acting CEO, Iain Williamson said the insurer’s exposure was around R290m.Old Mutual has said it is negotiating to exit this investment.