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Business Reporter
The Cottco Holdings Limited board is not happy with its former chairman and management for concealing sensitive information regarding Cottco’s financial position. Former chairman Mr Freeman Kembo resigned abruptly in September, a decision which most inside sources say was triggered by the explosive debt situation at the group following BancABC’s $5 million summons against the group.

Cottco last week applied for judicial management to keep its more than $60 million debt situation at bay.

An extract of minutes of a special Cottco Holdings Limited board meeting held at the company’s office in Workington on October 27 says that the board was concerned with management’s failure to disclose the company’s correct financial position.

The Herald Business is reliably informed that the board is seeking legal opinion on what action to take against former chairman Mr Kembo regarding his legal responsibilities to the company before his resignation.

The company is considering legal action against former chairman, Mr Kembo whom the board accuses of concealing critical information from its financial advisors until his abrupt resignation in September.

“The directors had noted with concern that the previous chairman (Mr Kembo) had received a letter from Cottco financial advisors Corporate Excellence wherein they had suggested that the company considers a scheme of arrangement with creditors or judicial management. The board noted with regret that despite this letter being received by the chairman in September, it was only shared with colleagues on the board on October 24, 2014,” the minutes show.

The directors deliberated on the way Mr Kembo had handled his exit from the board and noted that he should have at least had the courtesy to inform other board members of his intentions before the board meeting to allow him to notify the major shareholders before he resigned.

“The board resolved to seek legal counsel regarding Mr Kembo’s legal responsibilities to the company and the board before and after his resignation,” the board said.

Of particular concern to the board is that management, led by managing director Mr Collins Chihuri had not furnished the board with complete information of the actual amounts that were due for repayment.

BancABC has since taken legal action to recover $5 032 612, 52 including interest owed by Cottco after the company failed to owner its repayment plan.

“The board also noted that it was also disturbing to note that before the summons from BancABC were received on October 17, 2014 and a special board meeting convened on October 20, 2014 to discuss the unexpected development, management had not been furnishing the board with complete information of the actual amounts hat were due for repayment and the amounts that were overdue for payment but instead presented supporting schedules that reflected loan maturity dates as the date for full payment of outstanding debt,” the board notes say.

The Cottco board is taking steps to reconfigure the company to save it from imminent collapse.

Cottco defaulted on making due and punctual payment of the first instalment resulting in the outstanding amount under the agreement totalling $5 032 612,52 as at October 1 falling due and payable on October 10.

BancABC is just but one of the creditors at war with the cotton company for failing to honour its loan obligations.

As at October 23, Cottco owed a total of $48 180 886 to Ecobank, Agribank, CBZ, Stanchart, Stanbic, Afreximbank, ADBSA and BancABC.

Mr Chihuri referred questions to the acting chairman Dr Ncube.

In a move interpreted as side lining the managing director Mr Chihuri, Cottco’s board appointed company secretary Mr Pious Manamike to represent the company.

“That Mr Pious Manamike in his capacity as company secretary be and is hereby authorised to represent the company and to dispose to any affidavits and any legal documents required for this scheme of arrangement,” the board said.

Acting chairman Dr Ncube refused to comment as the matter is now before the courts.

“I cannot disclose any information at all because the case is now at the High Court,” said Dr Ncube.