Shakeman Mugari/Godfrey Marawanyika
CENTURY Holdings’ purported sale of Century Discount House to ENG Capital Investments last year has been declared null and void after revelations this week that all three
companies breached the Reserve Bank Act in the transaction.
Stock exchange-listed Century Holdings, which also owns Century Bank, breached five regulatory requirements of the central bank when it disposed of its discount house to the troubled ENG, it has been established.
During the handover period Century Holdings also breached provisions of the Companies Act.
A confidential liquidator’s report compiled by Cecil Madondo of Tudor House Consultancy, reveals that Century Holdings was party to the process that led to the collapse of Century Discount House (CDH).
CDH was placed under a curator by the Reserve Bank in January.
The report said since Century and ENG infringed banking regulations this nullified the supposed sale of CDH to ENG Capital Investments.
“It is however astonishing that neither CDH nor ENG Capital Investments had complied with the provisions of Section 26 of the Banking Act (Chapter 24:20) in that they failed to seek authority from the Registrar of Banks for the approval of the Agreement of Sale and this rendered the sale null and void,” the report said.
It said every banking institution was under an obligation to ensure that any person who wishes to acquire a stake in it should first get approval from the central bank in terms of the Banking Act.
The report was compiled on April 6 and should be presented to the High Court on April 28.
Madondo said every banking institution has an obligation to notify the Registrar of Banks and the central bank in writing as soon somebody acquires a significant stake and should obtain written approval from the registrar.
“In this case both Century Discount House Ltd and ENG Capital Investments did not follow the provisions of the Act in this acquisition deal,” Madondo said. “They proceeded to conclude the deal without notifying the registrar, and both parties sought authority after they had already finalised the deal.”
The findings mean that Century Holdings is liable for a whopping $44 billion which creditors are demanding from the Gary Shoko-led firm. If successful the claims could leave Century on its knees and scuttle its proposed merger with CFX.
The report said because of the $44 billion liability, there was a strong likelihood and linkage to buy back loan transactions between CDH and ENG to purchase shares by ENG in Century Holdings.
“Forensic auditors have matched the movement of funds from CDH to ENG to the purchase by ENG in Century Holdings Ltd of 18,59% shares and this was in contravention of Section 73 paragraph 1 of the Companies Act,” the report said.
Madondo’s confidential report on the other hand said that the central bank could have minimised losses to the depositors through implementation of efficient, effective and watertight supervisory principles and policies.
Century Holdings had not responded to this paper’s enquires by yesterday.
Officials at Century Holdings say they did in fact write to the registrar announcing that they had disposed of their stake in CDH but it was not clear if they were given the green light to go ahead.
During the same period Century management also wrote a letter to the directors of ENG reminding them that they should seek regulatory approval.