Online Reporter
Fidelis Munyoro
Chief Court Reporter
THE High Court has ordered the rectification of the shareholder register for the mining company DGL Number Five (Private) Limited, citing the unlawful issuance and allotment of shares.
The ruling by Justice Vivian Ndlovu, found that shares had been improperly allocated to Eagle Italian Shoes (Pvt) Ltd (2nd respondent), Ming Chang Sino Africa Mining Investment (3rd respondent), Fuel Africa (4th respondent) and Wang Ke (5th respondent) without the fulfillment of conditions outlined in a 2017 investment agreement.
The applicant, Gwampa Mining (Pvt) Ltd, sought to have the register amended under Section 162 of the Companies and Other Business Entities Act, asserting that the allotment of shares to the respondents violated both the agreement and the law.
Justice Ndlovu found that the shares were issued without adherence to clear conditions precedent detailed in the agreement, including the execution of a shareholder agreement, the injection of capital, and the payment of debts.
The 2017 investment agreement required the respondents to assume a US$4.3 million debt, pay royalties, and contribute to capital. The applicant argued that these obligations were not met, yet shares were unlawfully issued by the directors of DGL Number Five.
The third respondent, Ming Chang Sino Africa Mining Investment, opposed the application, claiming it had fulfilled its obligations, including payments of US$4.3 million and an additional US$1.2 million loan. However, the court held that Ming Chang Sino Africa Mining failed to provide evidence of these payments.
Justice Ndlovu stated, “The applicant has provided receipts and bank statements that clearly demonstrate the financial transactions relevant to this case. The third respondent, in contrast, has relied on unsubstantiated denials, failing to present supporting documentation for its claims.”
The court also noted that the issuance of shares to Wang Ke, who was not a party to the agreement, was “patently unlawful.” The Memorandum of Agreement explicitly prohibited the transfer of shares to third parties without unanimous written consent, which was not obtained.
The court dismissed several preliminary objections raised by Ming Chang Sino Africa Mining, including allegations of prescription, lack of locus standi, and material disputes of fact. Justice Ndlovu ruled that Gwampa Mining was entitled to seek relief under Section 162 of the Act as an aggrieved party and that the evidence presented was sufficient to resolve the matter without further oral testimony.
In its judgment, the court ordered that the names of the 3rd, 4th, and 5th respondents be removed from the register of DGL Number Five, and their share certificates cancelled.
The Chief Registrar of Companies (6th respondent) was directed to amend the records accordingly. Costs were awarded against the 3rd, 4th, and 5th respondents on a legal practitioner and client scale.
“The evidence presented demonstrates that the conditions for the issuance of shares were not met,” “The names of the 3rd, 4th, and 5th respondents were entered into the register without sufficient cause and this court has no hesitation in granting the application for rectification.”
The ruling, according to legal experts, reinforces the legal principle that shareholders must meet their obligations before being allocated shares and that companies must adhere to agreements governing such transactions.
