The Public Investment Corporation (PIC) said on Tuesday that it had asked its lawyers for advice on how to respond to a compliance notice received from the Companies and Intellectual Property Commission (CIPC) in which it is instructed to recover R4.3bn it invested in Ayo Technology Solutions.
It is unusual for the CIPC, which administers the Companies Act, to issue a compliance notice of this sort as its activities are normally confined to the administrative compliance requirements of the act such as company registration requirements and annual fees.
The CIPC said in the notice that it believed that the PIC’s directors contravened the act as company directors were compelled to perform their function in “good faith and for proper purpose in the best interests of the company and with a degree of care, skill and diligence”.
This had not been the case when the PIC’s directors invested R4.3bn in a company with a historical record of turnover disproportionately so much smaller.
Both the PIC and Ayo were seemingly taken aback by the notice.
Acting PIC company secretary Wilna Louw told the PIC commission of inquiry in Pretoria: “The PIC is looking into the matter and has already appointed Gwina Attorneys and senior counsel with a response to the PIC. I am unfortunately not at liberty to further comment as it may compromise PIC’s position.”
In a statement on Tuesday afternoon, Ayo's board of directors said: “We are mindful of the administrative functions of CIPC, which must comply with the promotion of administrative justice. Ayo believes that CIPC, by failing to inform and provide it with a copy of the alleged notice to PIC, has acted contrary to the provisions of the Promotion of Administrative Justice Act, 3 of 2000,” the company said.
This was because Ayo had learned of the notice through an article in Monday’s Business Day.
“It is concerning that a newspaper has been informed of such a letter prior to Ayo having been appraised of it. We believe that such an action on the part of CIPC is highly regrettable, if not irresponsible.”
The company said it also appeared that the CIPC had acted on incorrect information in making its decision.
In its notice, the CIPC notes the historical turnover of the company with the registration number 1996014461 first registered in 2003 and named Sekunjalo Health Care. The company’s name was changed in 2015 to Sekunjalo Technology Solutions and then to Ayo Technology Solutions in 2017.
At no point prior to the PIC’s R4.3bn investment in December 2017 does the company have turnover of higher than R12m, sometimes declaring no turnover at all.
As these turnover figures would have been freely available to the PIC on request, the CIPC said that “it has reasonable grounds to believe that the directors of the PIC did not act in good faith and proper purpose in the best interests of the company … when they decided to invest the disproportionate amount of R4.3bn in Ayo”.
In its statement, Ayo said that had the CIPC engaged with it and studied its prelisting statement it would have been aware that “Ayo historically, is an ICT investment holding group with underlying investments and subsidiaries. For the record, the audited financial statements of Ayo for the 12 months ended 31 August 2018 wherein Ayo generated revenue in excess of R638m for such financial year.”
Ayo said that it reasserts that the investment the PIC made into the holding group during the listing remains sound. Ayo has made significant strides forward with an established solid base, along with a number of good acquisitions and investments.
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