Jovia Saleh, foreign investors fight over Saracen

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Jovia Saleh, foreign investors fight over Saracen
Jovia Saleh, foreign investors fight over Saracen

Africa-PressUganda. A bitter row pitting Jovia Kyomuhendo, wife of Gen Salim Saleh, and two South African nationals has weighed down one of Uganda’s oldest private security companies, Saracen Uganda Ltd, to the point of dissolution or disintegration.

The years-long-running dispute over ownership and control of the company has entangled law firm—Kasirye and Byaruhanga Co., the registered company secretary, lawyer Hussein Kashilingi, who acts on Ms Jovia’s behalf, and the Uganda Registration Service Bureau (URSB).

The South African shareholders, Lafras Luitingh and Hendrik Pelser, alias Bill Pelser, highly placed sources say, accuse Ms Saleh of trying to irregularly take ownership of the company using her clout.

They allege financial impropriety and mismanagement including staffing the company with kinfolks and friends while several long-serving employees have been constructively dismissed.

Constructive dismissal, discharge or termination is a situation where an employee finds themselves with no option but to resign when an employer imposes unwelcome or hostile changes to their work terms.

For instance, the company’s chief executive is Alexander Akandwanaho, son to the Salehs, whom the South African shareholders allege was illegally appointed.

The company, in this case Saracen, which formally trades as Saracen Uganda Ltd or SUL, has reportedly not held board meetings since 2016.

Internal correspondences and accounts link the failure to convene the mandatory meetings to alleged frustrations by lawyer Kashilingi and the company secretary.

No shareholders’ meetings have as well been convened over the past five or so years at the behest of URSB, the government agency responsible for registration of companies, pending ruling on a shareholding dispute between Ms Jovia Saleh and the South Africans.

Twice, High Court Judge Musa Ssekaana has ruled in favour of the South Africans on the shareholding dispute. But URSB insists it has the last say on the matter.

Saracen Uganda Ltd was first registered in September 1995 as a special purpose vehicle owned by Saracen International Ltd (SIL) domiciled in the British Virgin Islands, a famous tax haven, taking 75 percent shareholding, and Special Services Ltd (SSL) holding 25 percent.

At the time Mr Lafras was the sole shareholder in SIL. On the other, SSL held 25 percent of Saracen out of which Gen Saleh owned 50 percent; Lt Col Juma Seiko 10 percent, and, Jacob Samson Loumo 10 percent. The remaining 30 percent shares were not issued.

The aim of the company was to “offer employment opportunities to veterans” of the National Resistance Army (NRA), the rebel group that brought President Museveni, who is Saleh’s brother, to power 35 years ago.

At inception, the company was first rumoured to be a government “private mercenary army”, but in an interview with this newspaper in 1995, Gen Saleh dismissed the claims saying “it (the firm) is purely a commercial venture to utilise the skills and experience of “redundant NRA veterans.”

The timing was important. In 1995, Uganda enacted a new progressive Constitution in which the NRA was renamed Uganda People’s Defence Forces (UPDF), which set the army on a professionalisation path from a ragtag rebel band.

The reforms of the 1990s to downsize the public sector, most of it pushed by the Bretton Woods institutions, resulted in abot 60,000 NRA soldiers being retrenched between 1990 to 1996.

It was the retrenched soldiers, feared at the time to possess both the skills and potential to cause insecurity, that now Gen Saleh in 1995 referred to as “redundant NRA soldiers” and moved to absorb in an alternative security outfit.

The company grew by leaps and bounds over the years, snapping up high-profile clients including oil exploration companies—from Heritage Oil to Tullow Oil to Cnooc and TotalEnergies E&P—in mid-western Uganda, to building a modest asset base.

The company is also poised to provide security to Uganda’s 296km section of the proposed East African Crude Oil Pipeline.

Saracen also ventured into Iraq and Afghanistan where it landed sub-contracts to provide security guards to the United States Department of Defence-contracted security firms such as Reed Inc and SOC LLC.

According to company financials, by end of May 2018, SUL had a monthly turnover of Shs2.9b compared to a monthly average of Shs2.8b during the preceding financial reporting year. Guarding services alone fetched the company Shs6.6b annually.

The company also unsuccessfully attempted expanding operations to neighbouring present-day South Sudan, the Democratic Republic of Congo (DRC) and Tanzania. Then, cracks emerged.

Boom to burst

A Daily Monitor investigation over the last seven months, including multiple interviews and review of hundreds of company documents including correspondences, internal emails, and court records, detail irreconcilable differences and deep cracks in the company’s top management.

At one time on November 17, 2017, Mr Lafras, a South African co-founder and shareholder, sought intervention of the then Uganda Law Society president, Mr Francis Gimara, to rein in on Mr Kashilingi for alleged misconduct including making personal threats.

Two days before that, Mr Lafras, the Saracen board chairman, according to the email trail, threatened to fly to Uganda to convene a shareholders’ meeting.

“Let’s wait and see if you will set foot here [in Uganda],” Mr Kashilingi shot back in the reply.

Earlier on in 2016, a registrar at URSB at the behest of the minority shareholders—SSL—had initiated an investigation into affairs of the company. The registrar suspended all shareholders’ meetings until further notice.

The registrar, however, did not suspend board meetings which, according to several correspondences, both SSL and company secretary have spurned. On the other hand, the company’s file in the registry contains up-to-date board resolutions filed without board meetings, in an attempt to comply with the Companies Act.

On April 8, this year, the South Africans directed the company secretary—Kasirye and Byaruhanga Co.—to convene a shareholders’ meeting.

Mr Kashilingi in a rejoinder on April 9 thwarted the efforts on grounds that: “This meeting would not be in the best interests of the company given that there are pending legal proceedings to determine shareholders and other rights.”

In another email exchange on June 19, 2020, Mr Lafras, who insists on being the rightful company board chairman talked down Mr Kashilingi as “confused.”

He wrote: “I am the chairman of the board, which you pretend to represent. You do not represent the board. Therefore, everything you have said on behalf of the board, without my consent, is null and void.”

Mr Kashilingi responded: “But, please, note that no amount of writing is going to reverse what has happened.”

In another December 24, 2020 correspondence to Kasirye and Byaruhanga Co., Mr Lafras wrote: “I also want to know how Alexander (Saleh) became CEO (chief executive officer). As company secretaries, you should have called for the board meeting which appointed him and taken minutes.”

He added: “I do not recognise the management of the company. As such, I can only ask for information from the company generally. This I will do without addressing my request to the ‘CEO’ who was appointed by a non-functional board.”

People familiar with the fall-out alleged that the company secretary is in cahoots with Ms Saleh, but Mr Enoch Rukidi, a senior partner at the law firm, told this newspaper that the ongoing disagreement is not peculiar.

“As company secretary, we await the outcome of the petition filed at the URSB to guide us on how to proceed. It has and will always be our policy to follow the law and as such we cannot discuss matters that are before a judicial entity before they are concluded,” Mr Rukidi said.

In email response to our inquires, lawyer Kashilingi said he was constrained to comment on the matter before a judicial body for adjudication.

Turf wars

The crux of the infighting ostensibly started in 2017 when SSL petitioned URSB challenging the new shareholding structure by the South Africans. However, other sources say the fissures emerged around 2009 when Ms Saleh first appeared in the company documents.

For more than a month she did not respond to our inquires for a comment on the matter.

Officially, SSL listed Ms Jovia as company director in a resolution filed with URSB in December 2016.

In a November 2017 correspondence to Mr Gimara to rein in on Kashilingi, Mr Lafras further detailed that Gen Saleh having been board chairman until November 2016 had “given his shares to his wife Jovia.”

“I have not been involved with the management of the company until November 2016,” Mr Lafras wrote.

“A new board was chosen with Hussein Kashilingi (who represents approximately 25 percent shareholding owned by Jovia Saleh) being appointed director with myself, and Mr Enoch Rukidi (from Kasirye and Byaruhanga Co.) I was appointed chairman of the board in November 2016,” he wrote.

Documents, however, detail Ms Jovia’s involvement with the company from around 2009. According to minutes of an October 12, 2009 annual general meeting, Ms Saleh attended the sitting, which among others, was convened to consider audited accounts for the year ended February.

During subsequent years, documents and company filings reveal that Ms Saleh started playing a more active role in the company ostensibly on her husband’s behalf.

In June 2012, Gen Saleh expressed intentions to step down as company board chairman on account of “disappointment” that the “original vision” he hoped for the company had not been realised.

He then proposed Mr Lafras as the successor, according to minutes of the extraordinary meeting held at Garuga, Entebbe.

Earlier in 2010, Mr Lafras had deregistered the holding company—SIL—of his majority shareholding in the British Virgin Islands.

The shareholding was re-alloted to Winork Investments Ltd (5 percent) owned by Mr Rukidi, and another 4 percent was sold to John Mugisha, the former SUL managing director who last year elected to retire “on medical grounds.”

The remaining SIL’s shareholding was split equally between Mr Lafras and Mr Pelser, each taking 33 percent.

Mr Pelser, documents show, was first involved with SUL in March 2000 when he was appointed as chairman board of directors alongside Mr Lafras, Capt Abbey Mukwaya, another National Resistance Movement historical-cum-presidential adviser and one Gerhard Deventer, who later went on to become the company’s managing director.

Seven years later, in January 2017, Ms Saleh, who represents SSL, kicked up the storm by petitioning URSB challenging the divestiture and new shareholding.

Put simply, SSL argued that the new shareholding structure including by way of increasing share capital by the majority shareholders (formerly SIL), reduces the value of their shares and as such prejudices them — because their shares are now worth less than what it was before the transfer. SSL then argued that the shareholding reverts to the date specified when the company was incorporated.

Mr Lafras and Mr Pelser, through their lawyers, court documents show, argued that due process was followed and that SSL was adequately consulted before shares were re-allotted and they “did not object”.

Pending determination of SSL’s petition, a one Jane Okot Langoya, a registrar at URSB, in a letter dated November 14, 2017, issued orders stopping all shareholders’ meetings, but not directors’ meetings.

The registrar also advised the parties to refrain from doing anything outside the law that would jeopardise the interest of the parties.

Winner takes it all

The South Africans, according to correspondences, petitioned the High Court in 2017 to wind up Saracen’s operations, to be bought by SSL at a fair value determined by an agent of court, or dissolve the company.

The duo also alleged prejudicial conduct by the minority shareholders to steal the company from them, the majority shareholders.

However, Justice Lydia Mugambe dismissed their petition and referred them to URSB for their petition to be heard together with another petition filed earlier by SSL.

In a February 14, 2018 correspondence, the South Africans’ lawyer Tom Mbalinda wrote to Ms Saleh, raising red flags that despite his clients being majority shareholders that they had been locked out of management of the company since the dispute started.

“There are no board or members’ meetings being called, and our client is not availed financial records of the company. This has adversely affected the company as well as our clients’ interests with the other shareholders,” Mr Mbalinda’s letter reads in part.

The letter tabled a proposal to rework another shareholding structure which would effectively bring Mr Lafras’ shares—the only shareholder Ms Saleh recognises—to 66.79 percent, and SSL’s to 33.21 percent in exchange for SSL dropping its URSB petition, and allowing the company to function normally.

It is not clear whether Ms Saleh agreed to the new proposal. But one source intimated that there were discussions on a potential buy-out.

“She had ridiculous terms and he (Lafras) said no. They could not reach agreement,” the source noted.

Both Mr Lafras and Mr Pelser declined to comment for this story when contacted by email.

In May 2019, URSB’s Langoya issued orders reversing SUL’s shareholding to the time of incorporation in 1995.

She further ordered for appointment of an inspector to look into alleged financial [mis]management of the company, a report which was submitted last year in October.

In the investigation review report by BDO Uganda, described on its website as a “centrally-managed network of offices”, was “prepared solely for purposes of reporting our findings to SSL” and hence should not be relied upon for any other purpose.

In 2019, Mr Lafras and Mr Pelser appealed the registrar’s ruling on the ownership of the shares in the High Court.

On May 29, 2020, Justice Ssekaana allowed the company’s appeal, and accordingly set aside the URSB’s decision on grounds that “the affected shareholders had not been given a fair hearing”, and that SSL had not, in its petition, prayed for reversal of shareholding as a remedy.

“The decision by the learned Deputy Registrar General to transfer shares back to Saracen International even when it is clear at the time that the company Saracen International had been struck off the register at the time of the order is strange,” Justice Ssekaana ruled.

The judge added: “The order to revert shareholding to a company, which had at the time of the order been struck off the register, is an attempt by the SSL to grab the shares of the appellants and the court should not condone it. The registrar should have factored all the above [considerations] in her mind instead of giving an irrational decision.”

Despite Justice Ssekaana’s verdict, documents show that the deputy registrar has continued to prohibit all company meetings, at least ones attended by the South Africans, on grounds that the issue of shareholding was still in dispute before her.

This compelled Mr Lafras and Mr Pelser to file an application for review of orders before Justice Ssekaana to clarify on his orders and instruct the registrar of companies at URSB to restore the new shareholding.

After submission of filings by both sides, the registrar in a December 4, 2020 correspondence suspended her ruling, pending a second judgement in the application by review by Justice Ssekaana.

In a June 15, 2021 decision, Justice Ssekaana ruled that the application for review did not have any merit, and his earlier orders in the May 2020 ruling still stand.

Our investigations show that URSB is yet to pronounce itself on the matter or comply with Justice Ssekaana’s orders while the minority shareholders, SSL, has allegedly taken over the company, threatening a joint venture partnership between local and foreigners, which also means a lack of mechanism for protection of foreign investors.

Origin

Saracen Uganda Ltd was first registered in September 1995 as a special purpose vehicle owned by Saracen International Ltd (SIL) domiciled in the British Virgin Islands, a famous tax haven, taking 75 percent shareholding, and Special Services Ltd (SSL) holding 25 percent.

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