Please stop Gwest scandalous action

Gwest booked preference shares but not properly issued.

The Jamaica Stock Exchange and the Financial Securities Commission must move to stop this scandalous action by GWest in issuing new shares that were not authorized by the shareholders of the company and was never mentioned as a contractual agreement in the prospectus that was issued in December last year.
The company cannot go to the public with an offer to sell shares and a critical contract that is now said to have exited, was not properly documented in the prospectus as a material contractual obligation of the company. By the way, the audited financial statement does not show any such contractual agreement.
GWest issued the first quarter results to June with an increase in share capital and the issue of $250 million preference shares without any information being communicated to shareholders. Now they have belated submitted an explanation to the Jamaica Stock Exchange, but those shares have been illegally issued and cannot stand.
The Gwest Corporation release states “on June 15, 2018 pursuant to the resolution passed at an Extraordinary General Meeting of the Company held on the 27th day of November 2017, it has signed an agreement for the conversion of $250,000,000 of shareholders’ loan to 10% Cumulative Non-Redeemable Preference Shares. Of the authorized 1,000,000 10% Cumulative Non-Redeemable Preference Shares, all units were allotted at $250 each to effect the conversion.”
The big question is if such a resolution existed why wasn’t the information included in the prospectus, why wasn’t the authorized capital split to include preference shares, why was the information not included in the audited financial report, why there was no mention of it in the annual report to shareholders.
With the wider shareholding not being made aware of it and not a contracted party to it must approve the increase in share capital with the issue taking place after the public issue of shares have passed for several months.
According to the company’s prospectus, section 7 lists all material contracts, no contract to issue preference shares is listed. Secondly, the reference to the share capital makes no mention of any other shares to be issued other than the ordinary shares of the company.
The prospectus stated the following: material contracts, entered into in the ordinary course of business, have been entered into by the Company with the following persons (“counterparties”) in the 2 years preceding as at the date of this Prospectus:
The above list has no contract in connection with the issue of preference shares to shareholders prior to the IPO.
The audited financial stated about Borrowings – “Shareholders’ loans: The principal balances represent loans from shareholders including US$741,248 (2017: US$742,515) of which US$716,560 was used for the purchasing of the land used for development (see Note 5). There are no set terms of repayment, however management does not anticipate repayment within the next twelve months as the loans are subordinated to the bank loans. No interest was charged on loans during the year as the shareholders agreed to waive such charges. Up to 2017 interest was charged at a rate of 4% and 15% per annum on the US dollar and Jamaican dollar loans, respectively.”
The note in the audited accounts to share capital states: “During the year ended March 31, 2017, interest payable on shareholders’ loans totaling $50 million, were converted to ordinary share capital. The 9,800 ordinary shares at no par value were allocated to the shareholders in the proportions of their shareholdings at that date. (13.2) During the year, the authourised ordinary share capital was increased to 1,000,000 ordinary shares by an ordinary resolution dated November 27, 2017. By an ordinary resolution of the same date each of the 1,000,000 ordinary shares were split into 1,000 ordinary shares such that the authourised ordinary share capital was increased to 1,000,000,000 ordinary shares. Further, by an ordinary resolution dated November 28, 2017 the 10,000 shareholdings of shareholders on register at November 27, 2017 were split such that their holdings of ordinary shares became 10,000,000 ordinary shares. Additionally, the shareholders who were allocated the 9,800 available shares at March 31, 2017, were further allocated 314,848,485 ordinary shares for the consideration of $50 million of interest converted to capital on March 31, 2017. (13.3) On December 7, 2017 the company made an offer for subscription to the public (IPO), of 160,000,000 of its ordinary shares at a price of $2.50 per share through the Junior Market of the Jamaica Stock Exchange (JSE). The company was officially registered on the Junior Stock Market on December 21, 2017. Total cost of the IPO of $30.848 million has been off-set against the issued share capital.”
“The company has one class of ordinary shares which carry no right to fixed income.”
The company released its annual report without a line mentioning the resolution to convert the loans to preference shares. The prospectus does not state it as a contractual obligation as such the prospectus that has become the legal document containing the contracts terms and obligations of all shareholders as of December must be honoured. It did not report the issue of any new shares accordingly, the additional shares are improperly issued and is a variance with the terms of the public offer.
IC raised this matter after the company released the first quarter results, we again raise the above in the interest of the integrity of the market. We now over pass this over to the JSE and the FSC to follow up.

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