The summons demands payment of R434 316, though the figure is now closer to R1m. From Moneyweb.
Windhoek-headquartered financial services group Trustco last month announced it was considering delisting from the JSE, Namibian Stock Exchange, and US over-the-counter market OTCQX, while simultaneously launching an application to become the first Namibian company to be listed on the Nasdaq.
The reason given by MD Quinton van Rooyen is a shift in the company demographics, with a substantial proportion of its shareholders now based in the US. There’s just one problem – the matter of outstanding rent of R434 316 at the Cape Town offices in Somerset Links Office Park.
The lease agreement allows Trustco to occupy six offices within the office park, and some of these have apparently been sub-let to other businesses.
Those businesses are evidently paying their rent, but none of that is finding its way to the building owner, Bayaphambili Properties.
Summons was served on Trustco Group International in November 2024 demanding payment for outstanding rent.
Trustco has “perpetually breached” the terms of its lease agreement, which was signed August 2020 and required payment of R88 000 a month, escalated at the rate of 8% a year. The lease agreement gives Trustco 20 days to rectify any breach.
The summons further alleges that despite several notices and written demands for payment of rent, which Trustco acknowledged and undertook to rectify, payment has still not been received.
Trustco’s response
Moneyweb asked Trustco for a response. Van Rooyen responded.
“I approve your enquiry and trust that you will publish my full response in the proper context,” he said.
“The group does not involve itself with landlord issues of subsidiaries.
“Needless to say, that we support investment subsidiaries when there is merit.
“In this case, I have requested the CEO of the SA subsidiary to provide you with all public legal documentation, and you can judge for yourself, objectively.
“I hope my reply suffice for your purpose.”
The SA subsidiary did not respond to Moneyweb, nor had it filed an answering affidavit at the time of publication.
Bad habits
JD van Wyk of Bayaphambili Properties says the rental agreement with Trustco is part of a 10-year lease that it inherited from the previous owners.
The summons was served on Trustco Group International because it was the signatory to the lease agreement.
“They [Trustco] got in the habit of paying rent late especially since they are not actually occupying the offices since Covid,” says Van Wyk.
“As of today they owe close to R1 million. Multiple times we have gone the legal route and they pay in the end but I am tired of being told ‘we are a listed company – we will pay – we have thousands working for us’.”
Nasdaq move
Trustco announced last year that its proposed Nasdaq listing would position it to better serve investors and enhance shareholder value.
“The proposed delisting process will include the appointment of an independent expert to provide an updated fairness opinion as required by JSE Listings Requirements,” it said.
“Trustco is engaging with the affected stock exchanges regarding a formal delisting proposal.”
Loans, property reclassifications, debt and forgiveness
Trustco requested an immediate suspension of share trading “due to several factors affecting market information symmetry”.
The company lost an appeal in the Supreme Court of Appeal (SCA) in 2024 following a ruling by the Financial Services Tribunal after the JSE directed it to restate its financials for 2019 to properly reflect loans made by Van Rooyen to Trustco over the reclassification of immovable properties from inventory to investment property.
Trustco asked the tribunal to reconsider the JSE’s decision in 2021, but that application was dismissed.
The matter then went to the high court and then the SCA, with Trustco losing all the way.
The court ruling explains that Van Rooyen advanced about N$546 million (currently equal to roughly the same amount in rands) to Huso Investments and other Trustco subsidiaries. Huso was a related company in which Van Rooyen held all the shares. In 2018, Trustco acquired all of Huso’s shares.
These loans were initially reflected in Huso’s financial statements as equity, but by the time Trustco acquired the shares, they had been reclassified as a liability – a debt to Van Rooyen.
A few weeks later Van Rooyen ‘forgave’ the loans, resulting in a N$546 million profit in Trustco and the triggering of an ‘earn-out’ clause which allowed Van Rooyen to acquire shares in Trustco on the basis that profit targets had been met.
In October 2018, a second loan of N$1 billion was advanced by Van Rooyen to Trustco.
That was also ‘forgiven’ in 2019 and then reflected in Trustco’s financial statements as a profit – again triggering an ‘earn-out’ mechanism that allowed Van Rooyen to acquire more shares in Trustco.
JSE queries the ‘reclassifications’
Another issue raised by the JSE was the reclassification of properties in Windhoek from inventory to investment property.
Read:
Namibian property market ‘robust’ – Trustco [Nov 2015]
MortgageMarket expands into Namibia [Apr 2024]
Trustco explained that the reclassification was done because a decline in demand meant that it did not anticipate selling the properties in the foreseeable future.
It thereafter revalued the properties and, as a result, reported a profit of N$693 million.
In 2020, the JSE informed Trustco that these entries did not conform with International Financial Reporting Standards (IFRS).
Trustco agreed to restate its figures in February 2023, but did so without prejudice to its rights “and solely to ensure the lifting of the suspension of the trading of its shares on the JSE,” reads the SCA ruling.
Trustco argued that the JSE’s stance overrode the requirements of IFRS – a view rejected by the SCA.
