The High Court has suspended the recently appointed Caps Private Limited’s five-member board, pending determination of the legality of Industry and Commerce Minister Sekai Nzenza’s decision to select the five, as the State is a major shareholder, without the involvement of the 51 percent majority shareholder, Caps Pharmaceutical Trust.
Caps Private Limited called for an annual general meeting on October 30 to elect new directors in terms of the Companies and Other Business Entities Act, as well as the shareholders agreement. But for unknown reasons the meeting did not take place.
Minister Nzenza then appointed Messrs Munyaradzi Matondo, Tapiwa Mashingaidze, Arthur Manase, Bothwell Nyajeka and a Mrs Gwatidzo as board members with effect from November 4.
Caps Pharmaceutical Trust, which owns 51 percent of the shares, said the minister unilaterally appointed the five without allowing the trust shareholder to appoint its own quota of directors in line with shareholders’ agreement.
The trust also separately took the dispute to the Commercial Arbitration Centre for recourse.
High Court judge Justice Owen Tagu ruled in favour of the Trust and suspended the new board pending determination of the arbitration case.
Justice Tagu barred Minister Nzenza from interfering with the company’s operations and provisionally reinstated the old board which was last appointed by shareholders to administer the business.
In the application filed at the High Court, the Trust argued that the appointment of the five was in violation of the Health Professions Act because the new directors were not pharmacists.
In terms of the law, the Trust argued, the majority of directors in an entity like Caps must be registered pharmacists. It was also argued that the Trust, being the major shareholder ought to have been involved in the appointment of the directors.
They also argued that the minister usurped the powers of the annual general meeting when she appointed the five.
The appointment of the five, the Trust argued, may create conditions of non-compliance with the law that may lead to revocation or suspension of the company’s manufacturing licence. The Trust said Minister Nzenza, who is not a shareholder, acted unlawfully by making such a crucial decision affecting the operations of the business without involving the majority shareholder.
“At best she represents the State which is one of the shareholders in Caps Holdings limited, which is a minority shareholder,” the Trust said.
Minister Nzenza, through the Attorney-General’s Office, maintained that she acted in terms of the law and the new directors must be allowed to do their work.
She said the matter was not urgent because another board was appointed in the same manner in 2017, but no objections were raised.
Minister Nzenza argued that Fredrick Mutanda Family Trust sold 67,52 percent of its shares to the Government, hence the Government becomes the major shareholder.
She said she appointed the board in order for it to attend the annual general meeting.