THE COLLAPSE of the Sharemax group of companies and the subsequent scheme of arrangement and offer of compromise to creditors and shareholders is set to have a massive knock-on effect on the economy.
André Prakke, a chartered accountant who has investigated the affairs and schemes promoted by Sharemax over many years, is adamant that investors in Sharemax’s various schemes will not get any further money out of them despite the sanctioning of the scheme of arrangement by the North Gauteng High Court on Friday.
“That money is gone. The construction companies are still owed millions. That money will have to come from somewhere. This tragedy will unfold by the end of this year,” he said.
Brenthurst Wealth Management director and financial advisor Magnus Heystek echoed Prakke’s views, saying individual investors still stood to lose a great deal of money despite the approval of the scheme of arrangement.
Heystek said an independent investigation of the scheme of arrangement had estimated that investors would only get back 10c in each rand that they had invested.
However, Heystek said if investors felt their financial brokers had let them down, they could take the brokers to the Financial Advisory and Intermediary Services Ombud. They could claim back up to R800 000 of their invested capital if the advice they received was shown to be inappropriate.
Prakke said the knock-on effect on the economy of investors losing their money was enormous because the estimated 30 000 investors translated into about 60 000 dependants, most of them pensioners who were reliant on income from these schemes.
This meant the state would have to look after their pensions and medical care, he said.
“The worst is that the people who caused this will never have to answer (for their actions) as things are happening now. There is serious corruption behind this. Where the corruption is I don’t know but it will come out in the next five years,” he said.
Prakke stressed investors in Sharemax had no certainty of outcome because the scheme of arrangement was based on the premise that funding would be obtained to get the scheme off the ground and to complete The Villa and Zambezi Retail Park.
But Prakke questioned what would happen if funding could not be obtained.
He said Sharemax’s entire operations and planning and preparations for the scheme of arrangement had in recent times been funded by diverting money from income-producing property syndications in the group, with the approval of the statutory managers appointed by the Reserve Bank, but without the knowledge of investors in these specific schemes.
This was both irregular and illegal in terms of both the old and new Companies Act without first obtaining the authority and approval of shareholders from these specific income-producing schemes at special meetings.
The analysis in the schedules to the scheme of arrangement revealed this diversion had so far cost between R12 million and R13m, which had been provided for over a long period of time by diverting funds from income-producing schemes, but a further R9m still had to be paid, Prakke added.
Pierre Hough, a strategist and economic crime investigator, said the provisions of the Companies Act could not be used to fix the contraventions by Sharemax of the Banks Act.
Hough said an investigation by the registrar of banks found the issuing of shares and linked debentures was a contravention of the Banks Act and none of the shareholders and creditors therefore became lawful shareholders in terms of the Companies Act.
In addition, Hough said the properties that were being syndicated were not transferred to the syndication vehicle at the time the shares and linked debentures were issued, which meant there was nothing underpinning the share issue.
Hough said the scheme of arrangement meant shareholders were compromising themselves and would lose their money while the people who caused the mess could “just walk away”.
He questioned whether the statutory managers appointed by the Reserve Bank had complied with their responsibilities because they “had failed to take possession and control of the assets of Sharemax”. page 18