BEE business in double trouble

BEE business in double trouble

THE Windhoek head office of the financially struggling Insurance Company of Namibia (Inscon) was mysteriously burgled on the eve of the company being placed under the control of two court-appointed curators.

Inscon’s head office was broken into between June 17 and 18 when unknown suspects gained entry to the office by cutting through burglar bars at the office’s main entrance in the city’s Post Street Mall, a Police spokesperson, Sergeant Stephan Nuuyi, confirmed this week. Nuuyi said items valued at about N$20 000 were stolen in the burglary.The stolen items include three laptop computers, two personal computers, and a computer server.None of the items has been recovered so far, and no suspects have been arrested, Nuuyi said.”The matter remains under our investigation,” he added.Inscon itself – and specifically alleged irregular dealings by its directors and management before the company’s reins were handed over to two curators almost three months ago – also remains under investigation.The High Court provisionally placed Inscon under the control of two provisional curators, Simon Steyn and Jay Pema, on April 4.The break-in took place on the day – or during the night – before an application from the Chief Executive Officer of the Namibia Financial Institutions Supervisory Authority (Namfisa), Rainer Ritter, in his capacity as Registrar of Short-term Insurance, to have Inscon placed under the control of two court-appointed curators returned to the High Court in Windhoek.With the return of the matter to court on Monday last week, the initial opposition that Inscon had put up against the bid to have it placed under curatorship was abandoned and Acting Judge John Manyarara confirmed the provisional order that the court had given in early April.With that, the curators’ take-over of the management of the company was confirmed.In terms of the order issued by Acting Judge Manyarara last week, the curators have been authorised to conduct investigations with a view to locating assets belonging to the company.The curators have been ordered to report back to the court by August 31 on the overall financial position of the company and on any irregularities committed by the company, its directors or its management.Claims about such alleged irregularities have been made from the beginning stages of the legal action that Namfisa took against Inscon.DIRECTORS UNDER FIRE Ritter stated to the court in an affidavit that he decided to ask that Inscon be placed under curatorship because of the company’s failure to comply with statutory solvency levels and “its ever-declining solvency margin”.Ritter also referred to the “continuous mismanagement” of Inscon by its directors, who are, with the exception of one, also its shareholders, and the inability of the directors of Inscon to satisfy him that under its current management Inscon is capable of adequately addressing and correcting the issues which have led to the company’s failure to comply with the Short-term Insurance Act’s requirements on solvency levels that have to be maintained by short-term insurers in Namibia.In terms of the requirements set by the Act, Inscon was supposed to maintain a solvency margin of at least N$8,95 million to safeguard policyholders’ interests, Ritter informed the court.By December 31 2006, though, the company’s solvency margin was calculated at N$3,68 million – a shortfall of N$5,3 million compared to the margin required by law.Ritter claimed that Inscon’s solvency decline was “directly attributable to its directors”, who had approved “extremely generous dividends” even when the company was in a loss-making position.He informed the court that in 2004, dividends amounting to N$15,69 million were paid to the shareholders, while Inscon made a loss of N$3,492 million for the 2004 financial year.In each of 2005 and 2006 financial years, a dividend of N$1 million was paid, while in 2006 the company estimates a loss of N$8,114 million.The company’s Chief Executive Officer, Ferdinand Otto, who is also one of Inscon’s directors and shareholders, hit back against Ritter’s claims in an affidavit that has also been filed with the court.He denied that the company’s solvency decline was directly attributable to the conduct of its directors and claimed that only the last dividend of N$1 million was paid to the shareholders personally.The other dividends, he claimed, were used to finance a management buy-out of the company that was carried out in 2004.Otto accused Ritter of trying to discredit the directors in order to persuade the court to place the company under curatorship.Before Namfisa took the legal steps against Inscon, the company did not default on paying out any insurance claims, Otto stated.The provisional curatorship immediately had a severe impact on the company, he added, claiming that within a month after the April 4 order was given, Inscon had lost 70 per cent of its clients.’RECKLESS AND NEGLIGENT’ In a first report to the court that the two curators have filed, the curators also are holding Inscon’s directors directly responsible – at least in part – for the company’s woes, and are accusing the directors of having been responsible for alleged irregularities which saw millions of Namibia dollars paid out to the company’s shareholders while it was already struggling through stormy financial waters.”(I)t is apparent that the precarious position in which the company finds itself can be attributed, in part, to irregular conduct on the part of the directors of the Company,” the curators stated in their report.They added that they however still had to fully investigate transactions in which “apparent irregularities” had taken place.The curators stated that it appeared “that there was a significant lack of corporate governance on the part of the directors” of Inscon.”On the face of it, the conduct of the directors appears to have constituted reckless and negligent trading on the part of the directors and it may be that the Curators, on behalf of the Company and its creditors, could seek to recover the losses of the Company from its directors,” the curators stated in their report.They also stated: “(T)he curators will need to undertake further investigations in order to determine whether the irregularities committed by the directors would allow the losses of the Company to be recovered from such directors.”The directors who approved the N$15,69 million dividend pay-out on November 24 2005 were Ferdinand Otto, Inscon Board Chairperson Charles Kauraisa, its then Finance Director, Albert Mundt, and fellow directors Johannes Endjala, Mbakumua Hengari and Johannes Engelbrecht.According to a Namfisa inspection report and the curators’ report that have been placed before the High Court, Endjala holds 30 per cent of the shareholding in Inscon Holdings, which is a 100 per cent shareholder in Inscon.Kauraisa, Otto, Mundt and Hengari each holds 17,5 per cent of the shareholding in Inscon Holdings.Nuuyi said items valued at about N$20 000 were stolen in the burglary.The stolen items include three laptop computers, two personal computers, and a computer server.None of the items has been recovered so far, and no suspects have been arrested, Nuuyi said.”The matter remains under our investigation,” he added.Inscon itself – and specifically alleged irregular dealings by its directors and management before the company’s reins were handed over to two curators almost three months ago – also remains under investigation.The High Court provisionally placed Inscon under the control of two provisional curators, Simon Steyn and Jay Pema, on April 4. The break-in took place on the day – or during the night – before an application from the Chief Executive Officer of the Namibia Financial Institutions Supervisory Authority (Namfisa), Rainer Ritter, in his capacity as Registrar of Short-term Insurance, to have Inscon placed under the control of two court-appointed curators returned to the High Court in Windhoek.With the return of the matter to court on Monday last week, the initial opposition that Inscon had put up against the bid to have it placed under curatorship was
abandoned and Acting Judge John Manyarara confirmed the provisional order that the court had given in early April.With that, the curators’ take-over of the management of the company was confirmed.In terms of the order issued by Acting Judge Manyarara last week, the curators have been authorised to conduct investigations with a view to locating assets belonging to the company.The curators have been ordered to report back to the court by August 31 on the overall financial position of the company and on any irregularities committed by the company, its directors or its management.Claims about such alleged irregularities have been made from the beginning stages of the legal action that Namfisa took against Inscon.DIRECTORS UNDER FIRE Ritter stated to the court in an affidavit that he decided to ask that Inscon be placed under curatorship because of the company’s failure to comply with statutory solvency levels and “its ever-declining solvency margin”.Ritter also referred to the “continuous mismanagement” of Inscon by its directors, who are, with the exception of one, also its shareholders, and the inability of the directors of Inscon to satisfy him that under its current management Inscon is capable of adequately addressing and correcting the issues which have led to the company’s failure to comply with the Short-term Insurance Act’s requirements on solvency levels that have to be maintained by short-term insurers in Namibia.In terms of the requirements set by the Act, Inscon was supposed to maintain a solvency margin of at least N$8,95 million to safeguard policyholders’ interests, Ritter informed the court.By December 31 2006, though, the company’s solvency margin was calculated at N$3,68 million – a shortfall of N$5,3 million compared to the margin required by law.Ritter claimed that Inscon’s solvency decline was “directly attributable to its directors”, who had approved “extremely generous dividends” even when the company was in a loss-making position.He informed the court that in 2004, dividends amounting to N$15,69 million were paid to the shareholders, while Inscon made a loss of N$3,492 million for the 2004 financial year.In each of 2005 and 2006 financial years, a dividend of N$1 million was paid, while in 2006 the company estimates a loss of N$8,114 million.The company’s Chief Executive Officer, Ferdinand Otto, who is also one of Inscon’s directors and shareholders, hit back against Ritter’s claims in an affidavit that has also been filed with the court.He denied that the company’s solvency decline was directly attributable to the conduct of its directors and claimed that only the last dividend of N$1 million was paid to the shareholders personally.The other dividends, he claimed, were used to finance a management buy-out of the company that was carried out in 2004.Otto accused Ritter of trying to discredit the directors in order to persuade the court to place the company under curatorship.Before Namfisa took the legal steps against Inscon, the company did not default on paying out any insurance claims, Otto stated.The provisional curatorship immediately had a severe impact on the company, he added, claiming that within a month after the April 4 order was given, Inscon had lost 70 per cent of its clients. ‘RECKLESS AND NEGLIGENT’ In a first report to the court that the two curators have filed, the curators also are holding Inscon’s directors directly responsible – at least in part – for the company’s woes, and are accusing the directors of having been responsible for alleged irregularities which saw millions of Namibia dollars paid out to the company’s shareholders while it was already struggling through stormy financial waters.”(I)t is apparent that the precarious position in which the company finds itself can be attributed, in part, to irregular conduct on the part of the directors of the Company,” the curators stated in their report.They added that they however still had to fully investigate transactions in which “apparent irregularities” had taken place.The curators stated that it appeared “that there was a significant lack of corporate governance on the part of the directors” of Inscon.”On the face of it, the conduct of the directors appears to have constituted reckless and negligent trading on the part of the directors and it may be that the Curators, on behalf of the Company and its creditors, could seek to recover the losses of the Company from its directors,” the curators stated in their report.They also stated: “(T)he curators will need to undertake further investigations in order to determine whether the irregularities committed by the directors would allow the losses of the Company to be recovered from such directors.”The directors who approved the N$15,69 million dividend pay-out on November 24 2005 were Ferdinand Otto, Inscon Board Chairperson Charles Kauraisa, its then Finance Director, Albert Mundt, and fellow directors Johannes Endjala, Mbakumua Hengari and Johannes Engelbrecht.According to a Namfisa inspection report and the curators’ report that have been placed before the High Court, Endjala holds 30 per cent of the shareholding in Inscon Holdings, which is a 100 per cent shareholder in Inscon.Kauraisa, Otto, Mundt and Hengari each holds 17,5 per cent of the shareholding in Inscon Holdings.

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