JSE finally smacks down AYO Technology Solutions errant…

Mbuso Hoza and Telang Ntasa were dismissed from the board of any stock exchange company for the next five years. Hoza and Ntsasa were members of the audit and risk committee of AYO Technology Solutions and failed to perform their oversight functions with respect to the 2018 interim results, which contained several significant errors.

AYO was registered with the JSE in December 2017, at which point the company’s audit and risk committee included Hoza, Ntsasa and Salim Young, who resigned as committee members on 19 February 2018. In May 2018, the company published its unverified interim financial results for the six months to February 28, 2018. Both Hoza and Ntsasa left the AYO board in August 2018.

Two years later, in August 2020, the JSE fined AYO 6.5 million rupees for publishing “a number of sets of incorrect, false and fraudulent financial results as a result of non-compliance with international financial reporting standards and listing requirements.” The company also posted some significant distortions in its 2018 interim results.

Commenting on the JSE ruling against the two former non-executive directors, Parmi Nateson, executive director of the Institute of Directors in South Africa, says it underscores the fact that directors play a key role that is legally defined and that there are serious consequences for failing to do so.

The Companies Act stipulates that a director must perform his or her authority and perform his or her duties in good faith, with due purpose and with the degree of care, skill and diligence that can reasonably be expected of a person with his or her general knowledge, skills and experience.

Ntsasa and Hoza admitted that they did not know the corporate governance or the rules and regulations governing the financial statements of a company listed on the JSE. In addition, they acknowledged that they were inexperienced directors and therefore failed in their duties to ensure proper financial reporting procedures at AYO Technologies.

Nateson says due diligence needs to be exercised by nomination committees and shareholders before appointing directors. In addition, candidates themselves should not take a position on the board if they do not have the necessary understanding of their responsibilities as well as the skills and experience to perform them. Once appointed, directors should be actively involved and make a positive contribution.

“This condemnation is welcomed because it emphasizes the principle of accountability in corporate life. However, the ban only applies to listed companies, so these two individuals can theoretically still serve on the boards of unlisted companies or other organizations, ”Nateson said. “This emphasizes the importance of the nomination and appointment process for members of the governing body of all types of organizations: only individuals with the right qualities and, most importantly, skills and experience should be entitled to such an important role.”

In this regard, the institute has introduced two appointments of directors registered with the South African Qualifications Authority to ensure that individuals meet minimum standards and are assessed in accordance with the director’s competencies. Designations also require owners to constantly update their skills through continuous professional development and be bound by a code of conduct. However, membership in the Institute is voluntary, and Nateson says he often sees directors accused of misconduct and discovers that they are not members of the institute.

“We applaud the JSE for this bold move and encourage more regulators, nomination committees and shareholders to ensure that the new generation of directors is properly equipped to fulfill their important role, both for them and for us,” she concludes.

Other cases where directors have let shareholders down

The JSE’s actions against the two former non-executive directors of AYO are particularly important given several developments over the past few years. Steinhoff is immediately remembered. In December 2017, the company’s CEO Marcus Just resigned after the company’s auditors reported accounting breaches.

An investigation by PwC found fraud in accounting amounting to $ 7.4 billion in inflated profits. In January 2022, the Cape-Cape Supreme Court finally approved a settlement claim of Rs 24 billion, and in October 2021, the Financial Supervision Authority fined Jost and three others Rs 241 million for Steinhoff-related insider trading.

Oceana’s obscene business deals are under investigation by the Financial Sector Supervision Authority and the JSE as the company roams without a CEO or CFO. CEO Imran Sumra resigned voluntarily, and CFO Hajra Karim was fired. Meanwhile, the company has failed to publish audited financial statements in line with JSE listing requirements and is potentially threatened with deviation from the exchange. BM / DM

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