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Who are the shareholders and what do they get?
Alfred Sasako
In its heyday, Solomon Islands’ Russell Island Plantation Estates Ltd [RIPEL] was the darling of the country’s economy.
Its large coconut, cocoa and livestock holdings on Russell Islands in Central Province and on Guadalcanal ensured a steady inflow of the much-needed foreign exchange into the country’s foreign reserves.
RIPEL’s glory days, however, were short-lived. Six years into its inception, the company went bust.
The company’s liquidation in September 2001 could not have come at a bad time.
Solomon Islands was engulfed in a civil uprising forcing people including employees of RIPEL to flee.
Large companies such as the Solomon Islands Plantation Ltd, which owned large palm oil plantations east of Honiara, was forced to shut down as militants went on a rampage destroying factory buildings, machines and houses.Other firms followed.
Consequently, thousands of workers were evacuated to their home provinces. It was a time when the country’s economy hit rock bottom as industries closed their doors, leaving tens of thousands of people without jobs. Guns ruled, particularly in Honiara.
On September 7, 2001, the Solomon Islands High Court oversaw the final nail on RIPEL’s coffin. A Wayne F Morris was subsequently appointed provisional liquidator.
The High Court also sanctioned a scheme of arrangements designed to help creditors, including Chinese businessman Patrick Wong’s Vanuatu-based International Comtrade and Shipping Limited, salvage part or some of their investments in RIPEL.
To ensure arrangements from hereon are legally binding, a Shareholders Agreement was drawn up.
Signed in Honiara on 27 February 2003, the agreement was between RIPEL, on one hand, and five others—International Comtrade & Shipping [SI] Ltd, Russell Islanders/Landowners, Provincial Government, Nationwide Ltd for [former RIPEL] Workers and Staff Schemes and the Solomon Islands Government—on the other. All five are creditors.
By any standard, the Shareholders Agreement is a strange contract. Strange, because it was cleverly crafted to protect the interests of the minority stakeholders in every way.
For example, Wong’s group holds only 15.1 percent stake in the deal. But in essence, it is the majority shareholder with five directors on the board of the company and the power of veto.
Stranger still, is the fact that none of the other shareholders, including the Solomon Islands Government with 20 percent equity, protested the arrangement.
Whether the contract had the taint of the country’s civil unrest, when gun trotting militants ruled, no one really knows.
What is known, however, is this. The 31-page document was signed in Honiara on February 27, 2003 at the height of the so-called ethnic tension.
The scheme of arrangements, sanctioned by the Solomon Islands High Court, saw the birth of Levers Solomon Ltd.
From here, it is a spider’s web of intrigue.
Here is the shareholder share arrangement, according to the document, as one example:
• Russell Islanders/Landowners—24.9 percent;
• Provincial Government—20.0 percent;
• Workers and Staff Scheme—20.0 percent;
• Solomon Islands Government —20.0 percent;
• International Comtrade & Shipping Limited or nominee—15.1 percent.
Numerically and in conventional business practices, it is the Russell Islanders/landowners who should hold a controlling interest in the company. But they are not. Why?
Instead, it is Wong’s Vanuatu-based International Comtrade & Shipping Ltd [ICSL] or its nominee that has the controlling interest.
Its nominee in this case is Pacific Management Services [SI] Ltd [PMSL]. ICSL has entered into an agreement with PMSL for the latter to oversee the operations of the new company which succeeded RIPEL.
Under the arrangement, PMSL has a 10-year agreement to provide management and consultancy services to the new outfit. PMSL has the option to renew for a further 10 years.
The fee? Well, just a cool 10 percent of export sales. Trading stocks listed in the agreement are, copra, coconut oil, coconuts, cocoa, meat products, livestock, copra meal and other commodities.
The export value of 10 percent in dollar terms of all these commodities over a 10-year period is nothing short of mind-boggling.
It gets even juicier as one flips through the pages of the agreement. The interpretation of a simple majority in terms of voting is an interesting one, for example.
It says: “Simple majority means a majority that together holds not less than 51 percent of the total voting rights of all directors or shareholders, as the case may be, present and entitled to vote at a meeting of directors or shareholders, as the case may be, but subject always to the power and right of veto held by each and every nominee of ICSL”.
According to the shareholders agreement, veto “means that no resolution can be or is passed”.
The composition of the Board of Directors is an interesting one too. The agreement stipulates that ICSL shall nominate up to five persons to the board. Its [ICSL] powers are far-reaching.
“ICSL shall always be entitled to appoint more persons to the board than the combined number of board members appointed by the other parties,” according to the document.
And this one: “The parties acknowledge that each and every nominee or appointee of ICSI on the board has the power or right of veto in respect of any motion or resolution”.
Any commercial outfit with its sight on success is always on the lookout for a sharp-eyed accountant. Levers Solomons Ltd does too. The document has identified the company’s valuer as its accountant.
According to the shareholders Agreement, the valuer is none other than Robert Goh, a Malaysian Chinese, who now lives in Sydney, Australia.
At one time during Sir Allan Kemakeza’s administration [2001- 2005], Goh headed the government’s Think Tank which was based in the Prime Minister’s Office.
Taiwan provided about US$10,000 a month to run the Think Tank. It was disbanded after an unsuccessful attempt on Goh’s life in Honiara. Whether the attack on Goh was related, no one knows.
Some reports even suggested the torching of the Pacific Casino Hotel in Honiara in April/May 2006 was aimed at destroying Goh’s office, located in the hotel.
As the shareholders agreement was being signed, Wong, formerly of Fiji, was engaged in intense discussions with the Solomon Islands National Union of Workers [SINUW].
The discussions were primarily aimed at getting union members on side.
A deal was struck, and on January 14, 2002, International Comtrade & Shipping Ltd and SINUW signed a Heads of Agreement.
The document, signed by Wong on behalf of ICSL, and a David Tuhanuku for the union, is a revealing document.
In the “legally binding” agreement, Wong had made an undertaking to settle all dues owed to workers and others by RIPEL, but which were still outstanding.
The only proviso is that ICSL’s scheme of arrangement or an alternative solution to RIPEL’s liquidation problem is accepted. It appears Wong never looked before he leapt.
Now, he is trying to wiggle his way out of the undertaking, signed and sealed in the Heads of Agreement.
At the time of signing, the monetary value of the undertaking was S$11,809,197.66 [about US$1,515,120.06]. It is made up of:
• Workers NPF contributions: S$4,516,995.33—about US$579, 530.50;
• Annual Leave Fares [3 years]: S$7,191,762.33—about US$922,703.11]
• SINUW Union fees [2 years]: S$100,440—about US$12,886.45]; and
• Union Expenses: S$400,000—about US$51,320.
Clause 3.1 of the Agreement says:
“In the event ICSL’s bid for scheme of arrangement or other alternative solution is successful, ICSL shall ensure and undertake:
[a] to a settlement in full [100%] of balance of all entitlements and benefits under the collective agreement between SINUW and RIPEL and as yet not paid by RIPEL and in the event that this amount is at variance with that of the provisional liquidator’s admitted amount then SINUW, the workers and RIPEL may mutually agree on the amount to be settled;
[b] to a settlement in full of all NPF dues deducted from their SINUW members and non-members’ wages by RIPEL and as yet not paid by RIPEL to NPF; and
[c] to a settlement in full of all SINUW membership dues deducted from their members’ wages by RIPEL but as not yet paid by RIPEL to SINUW.
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