Investment holding company Conduit Capital has successfully fended off a liquidation bid concerning its troubled subsidiary, Constantia Insurance. The court ruled in Conduit’s favour on Friday, allowing the company to continue its operations without interruption.
In an announcement, Conduit Capital stated, “Shareholders are referred to the announcement released on Sens on April 4, 2024, wherein it was advised that Constantia Insurance Company (in liquidation) sought orders to provisionally wind up Conduit Capital and its wholly-owned subsidiary, Conduit Ventures.”
“Given that the applications were opposed, the court had postponed the hearing to August 2, 2024. Shareholders are hereby advised that the applications were today, August 2, 2024, dismissed by the court with costs.”
This legal win comes amidst controversy surrounding Conduit Capital’s Constantia Insurance. Earlier this year, the company faced intense scrutiny following the murder of Cloete Murray, an insolvency specialist who had been investigating the firm.
Murray was shot and killed two days after he filed an urgent high court application to invoke section 417 of the Companies Act. Murray wanted to trace millions of rand allegedly siphoned from Constantia.
Cloete Murray’s concerns
In his affidavit, Murray expressed concerns about financial irregularities at Constantia. He suspected that the company’s financial records were altered to hide substantial amounts of money that had been siphoned from the firm.
His section 417 inquiry sought to give him and the joint liquidator the authority to subpoena individuals and companies to “make available documents, books, records, and other evidential material in their possession and/or under their control.”
Murray’s affidavit outlined the primary objectives of the inquiry: to investigate the reasons behind Constantia’s insolvency and to trace about R160 million ($8.6 million) missing from its accounts.
The insolvency expert also wanted to investigate an R60 million ($3.2 million) “high-risk investment” in the Trustco Group, a financial services group that invests and operates in sustainable high-growth assets in emerging markets, listed on both the Johannesburg and Namibia stock exchanges.
Notably, the Arbitration Foundation of Southern Africa ruled in June that Trustco Properties must pay Constantia R50 million ($2.6 million) plus interest. This ruling was connected to a failed 2020 transaction in which Constantia intended to purchase Herboths Property from Trustco Properties for R1 billion ($53.7 million), with an initial payment of R50 million ($2.6 million).
The deal fell through in March 2021 after the Johannesburg Stock Exchange (JSE) refused to approve a necessary circular that would have cost shareholders a fortune, citing concerns over the property’s valuation. The JSE directed Conduit and Trustco to release their circulars simultaneously and convene their shareholder meetings to vote on the deal on the same day.
Property Valuations Namibia had appraised Herboths Property at N$783 million ($42.1 million), saying it has 1,600 hectares of sellable land. However, Trustco’s financial statements for the year ending March 2020 valued the property at a much lower N$250 million ($13.4 million).
With the court dismissing the liquidation application, Constantia can now focus on stabilizing its operations. However, the ongoing investigations and financial scrutiny will continue to pose challenges.
