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Sharemax uncertainty nearing end

Johannesburg - The uncertainty that has faced Sharemax’s investors for months is nearing an end.

On Tuesday the directors of the different property companies in the Sharemax stable unanimously decided to propose a scheme of arrangement for all of the companies in the stable, which would set in motion a process to eventually determine how much each investor could get back.

Such a scheme of arrangement is, in terms of Section 311 of the Companies Act, generally used in cases with many parties presenting claims to determine each party's fair share, the assets available, and how the available shares can be distributed equitably between all the claims.

During this process the “wolves” are kept from the door, in that third parties cannot institute legal actions that would result in investors, in particular, suffering large losses.

A scheme such as this is presented to the High Court and, if the court agrees, all parties also have to agree to it, in line with fixed provisions, before it can be made an order of court.

Independent bodies have already been appointed to start the process.

Most of the thousands of investors who invested billions in Sharemax probably think that they are the only parties with claims, but things are not so simple.

For some years Sharemax had, for instance, subsidised the interest income of certain syndication schemes in order to arrive at the promised returns – but this was done through loans it made to the underlying property company.

The original plan had been to recover the loans when the buildings were eventually sold, but the reality is now that this is money that the property companies involved owe to Sharemax, and which Sharemax can claim back.

Even should Sharemax be prepared to write off the loans, an outside party which, say, might want to liquidate Sharemax could lodge a claim against the property companies to collect the money.

The purpose of the scheme of arrangement is specifically to ward off such an eventuality.

There are also other parties – including Capicol, the developer of projects like The Villa and Zambezi Retail, and the builders of the centres – which could also make claims.

Dawie Roodt, acting as spokesperson for the board of directors, said that an investigation into the company's activities had exposed a highly complex network which could lead to many claims and counterclaims, and it was very difficult on the face of it to determine the status of all the claims.

For that reason it had been decided to introduce a process such as a scheme of arrangement as soon as possible in an effort to find an orderly solution, he said.

The process also needed to be managed in collaboration with the statutory managers of the South African Reserve Bank, so as to establish structures that accorded with the provisions of the Banks Act.

These managers had been specifically appointed because Sharemax’s fundraising had been in contravention of the Banks Act.

- Sake24

For business news in Afrikaans, go to Sake24.com.

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