South Africa: A Stay In or Out of Jail for Old Mutual Directors?
Cape Town — Old Mutual has pleaded with the High Court, saying the potential imprisonment of board members – if they are found guilty of contempt of court for not allowing ousted CEO Peter Moyo to return to work – would be “excessive and inappropriate”, according reports by Moneyweb.
This follows Moyo’s application at the High Court in Johannesburg to declare the insurance group’s 13-member board to be in contempt of court for blocking him from returning to his office three times.
But lets start at the beginning. Peter Moyo was re-hired by in June 2017 as CEO of Old Mutual Emerging Markets, and later of Old Mutual, having left in 2005 to take over at Alexander Forbes. The Old Mutual board were aware of his business interests, including his investment company NMT Capital in which Old Mutual holds a huge stake. In May 2019 before Old Mutual’s AGM, he was suspended for a “breakdown in trust” during NMT Capital’s 2018 financial year, after the Board demanded certain reports which revealed “discrepencies” in dividend payouts.
In June 2019, Moyo was fired as the board declared a “conflict of interest” with Moyo. He went to court in Part A, to have his dismissal declared unlawful, citing board chairman Trevor Manuel as being behind the move. The courts overturned the board’s decision and instructed Old Mutual to allow him to return to work. Moyo returned to the Sandton offices and was told to leave the premises, with the insurer lodging an appeal on his reinstatement and issuing him with a second dismissal letter. Moyo’s lawyers said Old Mutual did not have enough reasons to fire their client and said the breakdown in the relationship between both parties was manufactured by the insurer. The judgment endorsed arguments submitted by Moyo’s lawyers that the reasons given by Old Mutual when it first dismissed and fired him were inconsistent.
In Part B of his application, Moyo stated that he wanted Manuel and the 13 other non-executive directors to be declared delinquent under Section 162 of the Companies Act, saying that they neglected their fiduciary duties, using the way in which the matter was handled by the company as a basis.
According to The Citizen, Moyo said that ignoring the court’s ruling amounts to “self-help, anarchy and unlawfulness.”
In court papers dated October 8, Old Mutual’s head of legal Craig McLeod said the imprisonment of the insurance group’s non-executive directors (or board members) would be an “inappropriately harsh punishment and certainly not warranted”. If the high court finds members of Old Mutual’s board to be in contempt of court, they might face hefty fines or imprisonment, which is an outcome Moyo is pushing for, saying board members need to argue in court why they should not be committed to imprisonment for six months or a period determined by the court, according to Moneyweb.
The outcome of this case will have a huge impact on the private sector and the insurance industry as a whole.
The case continues.
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