Carol Paton Writer at Large
Ayo Technology Solutions is African Equity Empowerment Investments’ biggest investment. Picture: 123RF/ GONGZSTUDIO
Ayo Technology Solutions is African Equity Empowerment Investments’ biggest investment. Picture: 123RF/ GONGZSTUDIO

Ayo Technologies, the company in which the Public Investment Corporation invested R4.3bn in December 2017, has launched two court applications aimed at holding on to the investment, it said in a statement on Monday. 

The investment, which was a private placement when Ayo listed on the JSE, has become controversial due to its large valuation.

The PIC bought a 29% stake in the company at R43 a share, implying a valuation of R14.8bn. But a few months before financial statements showed that Ayo had total assets of R292m and a book value of R67m. Since then the share has traded far below the original valuation.

The valuation caught the attention of the Companies and Intellectual Property Commission (CIPC), which administers aspects of the Companies Act. Last month, the commission served the PIC with a compliance notice instructing its directors to recover the investment on the grounds that they had contravened the Companies Act, by knowingly causing harm to their company.

Ayo said it had launched an application to interdict the PIC from complying with the notice. It also launched separate application against the CIPC to have the compliance notice set aside. It said there was no basis for the PIC to recoup its money.

“AYO maintains that the uptake by the PIC of its listed shares through a private placement in December 2017, was fully transparent and complied with all the necessary legal requirements and will defend any spurious action which seeks to undermine its contractual rights,” it said.

Legal proceedings were filed against the PIC last week.

“The notice demanded that the PIC recovers its investment within 15 days. AYO and its advisers believe that CIPC has no legal authority to issue the PIC with such a notice. To demand that the PIC recovers its investment from AYO within 15 days, flies in the face of established commercial practices and seriously undermines contractual rights and remedies that parties have in any potential civil disputes,” said the company.

Ayo had also launched proceedings to stop the PIC from acting on the compliance notice, pending the hearing of AYO’s review application of CIPC’s notice, it said.

The PIC said on Sunday that it had asked a court to set aside the compliance notice on the grounds that it was simply impossible to comply with in the given timeframe. However, it intends to recover its investment in Ayo, regardless of the compliance notice, it said.

“The PIC and CIPC agree that the deadline set by CIPC in its compliance notice, which ends on  March 14 2019, does not give the PIC sufficient time within which to undertake the necessary legal steps to implement the recovery of any losses it may have suffered in relation to the Ayo transaction.

“The PIC’s view is that the law does not allow the CIPC to amend its own notice to provide for a more realistic deadline. Once issued by the CIPC, the compliance notice may only be set aside, suspended or amended by the tribunal or a court of law,” it said.

As it was already engaged in a process to recover the money, the PIC approached the court to ensure that it is not in breach of the Companies Act.

patonc@businesslive.co.za