Pan African Resources Plc - Proposed Capital Reduction and Notice of General Meeting
Pan African Resources PLC
(Incorporated and registered in England
and Wales under the Companies Act 1985
with registered number 3937466 on 25 Pan African Resources Funding Company February 2000 ) Limited
Share code on AIM: PAF Incorporated in the Republic of South
Africa with limited liability
Share code on JSE: PAN
Registration number: 2012/021237/06
ISIN: GB0004300496
Alpha code: PARI
ADR ticker code: PAFRY
(“Pan African” or the “Company” or the
“Group”)
PROPOSED CAPITAL REDUCTION AND NOTICE OF GENERAL MEETING
Notice of general meeting
Notice is hereby given that a General Meeting of Shareholders (General Meeting) will be held at the offices of
Shareholders are advised that the notice of General Meeting and circular will be distributed to shareholders on Friday,
The circular provides information, in respect of a capital reduction to enable the Company to pay future dividends, address the payment of certain past distributions by the Company by way of dividends, and in respect of certain share buy backs as well as the resultant related party transactions. The Company now understands that these past distributions have apparently been paid otherwise than in accordance with the Companies Act 2006. A copy of the notice of General Meeting and circular are also available at: https://www.panafricanresources.com/investors/shareholder-announcements/
The chairman’s letter has been extracted from the circular and is set out at the end of this announcement. The defined terms used in the chairman’s letter shall have the same meaning as set out in the circular.
Salient dates relevant to the General Meeting
Record date for receipt of the Circular Tuesday,21 May 2024 Last day to trade on the JSE in order to Monday,3 June 2024 vote at the General Meeting Last day to trade on the LSE in order to Tuesday,4 June 2024 vote at the General Meeting Record date for purposes of voting at Thursday,6 June 2024 the General Meeting Latest time and date for receipt of 10.00 (London time) a.m. on Thursday, 6 Forms of Proxy for the General MeetingJune 2024 General Meeting 10.00 (London time) a.m. on Monday, 10June 2024 Expected date of initial directions Friday,21 June 2024 hearing of the Court Expected date of Court Hearing to Tuesday,2 July 2024 confirm the Capital Reduction Expected effective date for the Capital Wednesday,3 July 2024 Reduction
Notes
1. The expected dates for the confirmation of the Capital Reduction by the Court and the Capital Reduction becoming effective are based on provisional dates that have been obtained for the required Court hearings of the Company’s application. These provisional hearing dates are subject to change and dependent on the Court’s timetable.
2. The timetable assumes that there is no adjournment of the General Meeting. If there is an adjournment, all subsequent dates are likely to be adjusted accordingly.
For further information on Pan African, please visit the Company's website at:
___________________________________________________________________________ |Corporate information | |___________________________________________________________________________| |Corporate office |Registered office | | | | |The Firs Building |2nd Floor | | | | |2nd Floor, Office 204 |107 Cheapside | | | | |Cnr. Cradock and Biermann Avenues |London | | | | |Rosebank, Johannesburg |EC2V 6DN | | | | |South Africa |United Kingdom | | | | |Office: + 27 (0)11 243 2900 |Office: + 44 (0)20 7796 8644 | | | | |info@paf.co.za|info@paf.co.za | |______________________________________|____________________________________| |Chief executive officer |Financial directorand debt officer | | | | |Cobus Loots |Deon Louw | | | | |Office: + 27 (0)11 243 2900 |Office: + 27 (0)11 243 2900 | |______________________________________|____________________________________| |Head: Investor relations | | | | | |Hethen Hira |Website: www.panafricanresources.com| |Tel: + 27 (0)11 243 2900 | | |E-mail: hhira@paf.co.za | | |______________________________________|____________________________________| |Company secretary |Nominated adviser and joint broker | | | | |Jane Kirton |Ross Allister/Georgia Langoulant | | | | |St James's Corporate Services Limited |Peel Hunt LLP | | | | |Office: + 44 (0)20 7796 8644 |Office: +44 (0)20 7418 8900 | |______________________________________|____________________________________| |JSE Sponsor and JSE debt sponsor |Joint broker | | | | |Ciska Kloppers |Thomas Rider/Nick Macann | | | | |Questco Corporate Advisory Proprietary|BMO Capital Markets Limited | |Limited | | | |Office: +44 (0)20 7236 1010 | |Office: + 27 (0)11 011 9200 | | |______________________________________|____________________________________| | |Joint broker | | | | | |Matthew Armitt/Jennifer Lee | | | | | |Joh. Berenberg, Gossler & Co KG | | | | | |Office: +44 (0)20 3207 7800 | |______________________________________|____________________________________|
The chairman’s letter (which is dated
“Dear Shareholder,
PROPOSED CAPITAL REDUCTION
and
PROPOSED RECTIFICATION OF RELEVANT DIVIDENDS
and
RELATED PARTY TRANSACTIONS
and
NOTICE OF GENERAL MEETING
1. Introduction
I am writing to provide you with details of a proposal to maintain the Company’s ability to return value to Shareholders in the future by way of dividends and to address the payment of certain past distributions made by the Company by way of dividend and payments in respect of certain share buy backs, that have now understood to have been paid otherwise than in accordance with the Companies Act 2006.
This document also provides the details of a General Meeting that will be held at the offices of
The purpose of this document is to provide you with information about the Capital Reduction, the proposed rectification of Relevant Distributions and the related party transactions and to explain why the Board considers the Resolution to be in the best interests of the Company and its Shareholders as a whole and unanimously recommends that you vote in favour of the Resolution to be proposed at the General Meeting.
Given the interests of the Board in the Directors’ Deed of Release (and therefore the Resolution), and as required by the AIM Rules, the Board are not considered to be independent in relation to the Directors’ Deed of Release or the Resolution and the Board therefore cannot provide the opinion required by Rule 13 of the AIM Rules as to the fairness and reasonableness of the Directors’ Deed of Release and the Resolution. Accordingly, Peel Hunt (as the nominated adviser of the Company) has confirmed that the Directors’ Deed of Release and the Resolution are fair and reasonable insofar as the Shareholders are concerned and recommends that Shareholders vote in favour of the Resolution.
For the avoidance of doubt, the Proposals do not constitute a related party transaction in accordance with the JSE Listings Requirements.
Shareholders should note that, unless the Resolution is approved at the General Meeting and the Court subsequently confirms the Capital Reduction:
A) the Capital Reduction will not take effect; and
B) the declaration and making of distributions otherwise than in accordance with the Act will not be rectified.
If the Resolution is not approved, then the Company will retain a potential right to make claims against the Recipient Shareholders for recovery of the payment of the Relevant Distributions. There is no certainty that judgment would be successfully obtained by the Company against the Recipient Shareholders or that any amount could be recovered if the Company sought to pursue these potential claims.
If the Resolution is not approved, then the Company has a potential right to bring claims against the Relevant Directors in relation to the payment of the Relevant Distributions. There is no certainty that judgment would be successfully obtained by the Company against the Relevant Directors or that any amount could be recovered if the Company sought to pursue these potential claims.
Part II of this document contains definitions of words and terms that have been used throughout it. Please refer to Part II as you review this document.
1. Background to, and reasons for, the Capital Reduction
The Group is an African-focused gold producer with a production capacity in excess of 200,000 ounces of gold per annum. It owns and operates a portfolio of high-quality, low-cost operations and projects, which are located in
The Board considers the Group to be mid-tier gold producer. The Presentation Currency of other similar gold-producing groups is US$ and so, in order to ensure that the Group can easily be compared to those other similar gold-producing groups, US$ was chosen to be the Presentation Currency of the Company and the Group. The first audited accounts of the Company and the Group where the Presentation Currency was US$ was the audited accounts for the year ended
The Act requires that a public limited company must satisfy certain criteria in order to be able to declare and pay a dividend. Not only must a public limited company have distributable profits, but the Act also provides that a public limited company may only pay a dividend if it can satisfy the Net Assets Test. The Company paid the dividends set out in paragraph 3 below in respect of the years ended
A company may only acquire its own shares when the purchase price for such acquisition is paid out of profits available for distribution (as determined in accordance with the Act) or out of the proceeds of a fresh issue of shares for that purpose. The determination of the level of distributable profits for the purchase of an own share acquisition engages the same principles as dividends, including a need to satisfy the Net Assets Test. With the Buy Backs, the Company acquired its own shares in the period 1 April and
It has come to the attention of the Company that the Technical Release clarifies that the Net Assets Test is required to be performed on the Presentation Currency amounts (not the Functional Currency amounts). Since 2019, when the presentation currency was changed to the US Dollar, the Rand has depreciated by 34% over the five years ending
Under the Act, a company may, with the sanction of a special resolution passed by its shareholders and confirmation of the Court, reduce or cancel its share capital, share premium account, and other reserves. It may then apply the sums resulting from such reduction to its distributable reserves. These sums may then be treated as distributable for the purposes of making future returns to Shareholders.
The Company has at
The Act requires that if a company issues shares at a premium to the nominal value of those shares for cash or otherwise, a sum equal to the aggregate amount or value of the premiums must be transferred to the company’s share premium account. A share premium account can only be used in very limited circumstances. The Company intends to reduce the Share Premium Account in full.
The Share Premium Account is a statutory reserve in respect of which the Court has the power to sanction the reduction or cancellation.
The Capital Reduction, if approved, will provide the Company with the flexibility to continue with its existing progressive dividend policy and will allow the rectification of the Relevant Distributions which have been paid otherwise than in accordance with the Act as described in paragraphs 3 and 4 of Part IV of this document.
1. Payment of Relevant Distributiona
Details of the Relevant Dividends are set out below:
Date and Total type of Amount per Amount per Amount per Exchange rate aggregate dividend Ordinary Ordinary Ordinary used to amount payment Share in ZAR Share in Share in US convert into of dividend (interim or pence cents US$ paid in US$ final) Final dividend in respect of £1 = ZAR the year ZAR 0.15179 US 19.0825 ended 30 0.02237450.11725 pence centsUS$3,399,049 June 2019 –US$1 = ZAR paid on 30 14.74 December 2019 Final dividend in respect of £1 = ZAR the year 0.92105 US 20.3320 ended30 ZAR 0.140.68857 pence centsUS$20,606,644 June 2020 –US$1 = ZAR paid on 15 15.20 December 2020 Final dividend in respect of £1 = ZAR the year 21.1880 ended30 ZAR 0.180.84954 pence 1.13924 cents US$24,984,084 June 2021 –US$1 = ZAR paid on 14 15.80 December 2021 Final dividend in respect of £1 = ZAR the year 1.05820 US 20.71 ended30 ZAR 0.180.86915 pence centsUS$23,168,220 June 2022 –US$1 = ZAR paid on 13 17.01 December 2022 Final dividend in respect of £1 = ZAR the year 0.95491 US 23.61 ended30 ZAR 0.180.76239 pence centsUS$21,226,866 June 2023 –US$1 = ZAR paid on 12 18.85 December 2023 Total aggregateUS$93,384,863 value
Part IV of this document sets out details of how the Relevant Dividends were paid otherwise than in accordance with the Act as well as the proposals for rectification.
Between 1 April and
The consequence of the Relevant Distributions being made otherwise than in accordance with the Act is that the Company may have a claim against all shareholders (former or present) who received any such distribution (up to the maximum value of cumulative distributions received by each shareholder from the Relevant Distributions) as well as a claim against all Directors (former or present, individually or in aggregate) who approved the making of the Relevant Distributions, up to the total aggregate value of
The Company has entered into the Shareholders’ Deed of Release and the Directors’ Deed of Release. The consequence of the entry into these deeds by the Company is that the Company will be unable to make any claims against: (a) the Recipient Shareholders; and (b) the Relevant Directors, in each case in respect of the Relevant Distributions.
In addition, the Company has entered into the Peel
The entry by the Company into the Directors’ Deed of Release constituted a related party transaction (as defined in the AIM Rules). This is because each of the Relevant Directors (comprising persons who are, or were within the last 12 months, directors of the Company) is deemed to be a related party under the AIM Rules and they will be released from any liability to repay any amounts of the Relevant Distributions pursuant to the Directors’ Deed of Release (as applicable). Paragraph (e) of the Resolution will seek the specific approval of the Company’s shareholders for the entry into the Directors’ Deed of Release.
1. Ensuring the Company complies with the Net Assets Test in the future
The technical issues identified in paragraph 3 above and Part IV of this document in respect of the Relevant Distributions are of a historical nature and there is no change in the Company’s financial position or its net asset value as a consequence.
The Company is considering a number of accounting approaches/strategies to ensure adequate distributable income (and the ability of the Company to comply with the Net Assets Test) in the future Accordingly, we do not believe any further remedial action is required. For avoidance of doubt, the Company continues to deem its procedures, systems and controls to be sufficient to enable it to comply with its obligations under the AIM Rules, disclosure requirements, transparency rules and corporate governance rules, as well as its requirement to make timely and accurate disclosure to the market.
1. The Capital Reduction
As a result of the Company’s stated desire to continue with its existing progressive dividend policy, and in order to rectify the Relevant Distributions made otherwise than in accordance with the Act, the Company must undertake the Capital Reduction to provide it with the necessary distributable reserves.
In addition to the approval by Shareholders of the cancellation of the share premium account, the reduction of capital requires the approval of the Court. Accordingly, following the General Meeting, an application will be made to the Court in order to confirm and approve the reduction of capital.
In providing its approval of the Capital Reduction, the Court may require measures to be put in place for the protection of creditors (including contingent creditors) of the Company whose debts remain outstanding on the relevant date, except in the case of creditors who have consented to the Capital Reduction. Shareholders should note that (although the Group has debt and creditors) the Company itself (which will be the entity considered by the Court) has no senior debt and only minor creditors for service providers to the Company are expected. Such creditor protection measures may include seeking the consent of the Company’s creditors to the Capital Reduction or the provision by the Company to the Court of an undertaking to deposit a sum of money into a blocked account created for the purpose of discharging the non-consenting creditors of the Company or an undertaking to treat as undistributable for the time being certain sums representing the realisation of “hidden value” in the balance sheet as at the Effective Date .
It is anticipated that the initial directions hearing in relation to the Capital Reduction will take place on Friday, 21
There will be no change in the number of Ordinary Shares in issue (or their nominal value) following the implementation of the Capital Reduction and no new share certificates will be issued as a result of the Capital Reduction. The Capital Reduction itself will not involve any distribution or repayment of capital or share premium by the Company and will not reduce the underlying net assets of the Company. The distributable reserves arising on the Capital Reduction will, subject to the discharge of any undertakings required by the Court as explained above, support the Company’s ability to pay dividends should circumstances in the future make it desirable to do so and the appropriation of profits to ratify relevant accounting entries.
Shareholders should note that if, for any reason, the Court declines to approve the Capital Reduction, the Capital Reduction will not take place. The Board reserves the right to abandon or to discontinue (in whole or in part) the application to the Court in the event that the Board considers that the terms on which the Capital Reduction would be (or would be likely to be) confirmed by the Court would not be in the best interests of the Company and/or its Shareholders as a whole. The Board has undertaken a thorough and extensive review of the Company’s liabilities (including contingent liabilities) and considers that the Company will be able to satisfy the Court that there is no real likelihood that any creditor of the Company would be prejudiced by the Capital Reduction.
1. General Meeting and Resolution
The Notice of General Meeting is set out in Part V of this document.
The General Meeting will take place at the offices of
The Resolution, which will be proposed as a special resolution, has five elements to it, each of which are summarised below:
-- the first element is to approve, subject to confirmation of the Court,
the cancellation of the Share Premium Account.
-- the second element is, subject to the Capital Reduction becoming
effective, to approve that distributable profits of the Company be
appropriated to the relevant accounting periods during which the
Relevant Distributions were declared and paid.
-- the third element is to approve the release and waiver by the Company
of any claims which it has or may have against either of the Brokers in
respect of the Buy Backs (and the reciprocal release and waiver by each
of the Brokers of any claims which either of them have or may have
against the Company) in respect of the Buy Backs and to ratify and
authorise the entry into the Brokers’ Deeds of Release by the Company .
-- the fourth element is to approve the release and waiver of all claims
which the Company may have in respect of the Relevant Distributions
against previous and current shareholders and their successors in title
and to ratify and authorise the entry into the Shareholders’ Deed of
Release by the Company.
-- the fifthelement is to approve the release and waiver of all claims
which the Company may have in respect of the Relevant Distributions
against the directors (current and former and their personal
representatives and successors in title) at the time of declaration and
payment of each respective Relevant Distributions and to ratify and
authorise the entry into the Directors’ Deed of Release by the Company.
The Resolution (being a special resolution) will be passed if 75% or more of the votes cast (in person or by proxy) at the General Meeting are in favour of the Resolution.
1. Related Party Transactions
Given the interests of each of the Directors in the Resolution it is not appropriate for the Board to provide a recommendation in this instance.
In lieu of any independent directors’ recommendation in relation to the Resolution, in order to provide a statement as to what is fair and reasonable, and specifically due to all Directors being statutory directors at the time the Relevant Distributions were proposed and paid, Peel Hunt, in its capacity as Nominated Adviser to the Company for the purposes of the AIM Rules, considers that the Resolution (and specifically the entry by the Company into the Shareholders’ Deed of Release and the Directors’ Deed of Release) are fair and reasonable insofar as the shareholders of the Company are concerned.
1. Taxation position ofUK shareholders
The following comments are intended as a general guide only and relate only to certain
Any Shareholder who has any doubt about their own taxation position, or who is subject to taxation in any jurisdiction other than the
The Share Premium Reduction
The Share Premium Reduction should not have any consequences for
No stamp duty or stamp duty reserve tax will be payable on the Reduction of Capital.
1. Action to be taken in respect of the General Meeting
Shareholders can appoint a proxy electronically using the link
www.signalshares.com
– Details of how to appoint a proxy in this way are set out on pages 20 to 23
of this document. Details of how to complete, or request an additional, hard copy Form of Proxy are set out on pages 20 to 23 of this document. To be valid, a Form of Proxy must be returned as soon as possible and so as to be received by the Registrars by not later than
10.00
a.m. (
The completion and return of the Form of Proxy will not prevent you from attending and voting at the General Meeting in person.
In accordance with current best practice and to ensure voting accurately reflects the views of Shareholders, it will be proposed at the General Meeting that voting on the Resolution will be conducted by poll vote rather than by a show of hands and the relevant procedures will be explained at the General Meeting.
If the Resolution is not passed, the Company may continue to have claims against the Relevant Directors and Recipient Shareholders.
1. Questions
If you wish to ask a question relating to the business of the General Meeting in advance, please submit your questions to info@paf.co.za. or jane.kirton@corpserv.co.uk, please include in your email: the shareholder’s full name, number of shares held and telephone contact details.
1. Recommendation
The Board consider the Resolution to be in the best interests of the Company and its Shareholders as a whole and the Board unanimously recommend that you vote in favour of the Resolution to be proposed at the General Meeting.
Given the interests of the Board in the Directors’ Deed of Release (and therefore the Resolution), and as required by the AIM Rules, the Board are not considered to be independent in relation to the Directors’ Deed of Release or the Resolution and the Board therefore cannot provide the opinion required by Rule 13 of the AIM Rules as to the fairness and reasonableness of the Directors’ Deed of Release and the Resolution. Accordingly, Peel Hunt (as the nominated adviser of the Company) has confirmed that the Directors’ Deed of Release and the Resolution is fair and reasonable insofar as the Shareholders are concerned and recommends that Shareholders vote in favour of the Resolution.
In addition, the Directors have each undertaken to abstain, and to take all reasonable steps to ensure that their respective associates abstain, from voting on the Resolution. The aggregate shareholdings of the Directors are 14,488,695 Ordinary Shares representing approximately 0.76% of the Ordinary Shares in issue at the date of this document.
Yours faithfully
Non-executive Chairman”
