In an unprecedented move, the organisation that administers and enforces the Companies Act has instructed the Public Investment Corporation (PIC) to recover the R4.3bn it invested in Ayo Technology Solutions.
In making the investment, directors had knowingly caused harm to Africa’s largest asset manager, the Companies and Intellectual Property Commission (CIPC) said in a compliance letter sent by commissioner Rory Voller on Thursday.
It is the latest in a snowballing series of disasters for Ayo and Iqbal Survé, who holds a large indirect stake in the company.
The investment is also under scrutiny at the Mpati commission of inquiry into the PIC, which is probing allegations of wrongdoing at the company.
Two weeks ago tape recordings emerged that show that Surve had misled the PIC about Ayo’s assets, though he vehemently denies having done so.
The PIC is the single-biggest investor in the SA economy with more than R2-trillion of assets under management, owned mainly by the Government Employees Pension Fund.
"Within 15 business days of this Compliance Notice, the board of directors of the PIC must recover the capital investment of R4,3bn made to Ayo," reads the notice.
It also instructs the directors to recover any interest that has accrued on the capital amount within six months.
It is unusual for the CIPC to issue a compliance notice of
this sort as its activities are normally confined to the administrative compliance requirements of the Companies Act, related to registration.
Several lawyers expressed surprise that it had ventured so far as to make a judgment call on an investment decision by an individual company.
But the commission, which has become more active
over the past five years in investigating directors where corruption and fraud is suspected, said it had become difficult for it not to act in light of the background information it has on the annual turnover of Ayo and the information about the PIC-Ayo transaction that is now in the public domain.
The key issue, said the CIPC, was the extraordinary high valuation the PIC placed on Ayo’s shares at its listing in December 2017, when it bought a 29% stake at R43 a share, implying a valuation of R14.8bn.
At the end of August 2017, financial statements showed that Ayo had total assets of R292m and a book value of R67m. On Monday, the share was trading at R17.99.
The CIPC said the valuation that the PIC placed on Ayo did not square with its own information, which showed a company that at no time in its history had realised a turnover of more than R12m.
The Companies Act empowers the commissioner of the CIPC to issue a compliance notice to any person where there are "reasonable grounds" to suspect a contravention of
the act.
A compliance notice may require the person to whom it is addressed to "a) cease, correct or reverse any action in contravention of the act; b) take any action required by the Act; c) restore assets or their value to a company or any other person".
The directors of the PIC are seen to have contravened section 76 of the act in which it is stated that a director may not use his position to "knowingly cause harm to the company".
The PIC had not commented at the time of publication.
A spokesperson for Ayo said on Monday that the company "had not received any communication in this regard and can therefore not comment at this stage".
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