Dear Editor,
Over the past few days, I have been engaged in several conversations with both individual and corporate shareholders in Banks DIH Limited who, like me, received from the company correspondence informing them that their shares in the company had been invalidated, and providing them with a “replacement share certificate” for an equal number of shares in a new holding company Banks DIH Holdings Inc. (BDIHHI).
Like an estimated 90% of other shareholders, I never supported the Scheme of Arrangement approved at a special members meeting of the company. The make-up of those supporting the resolution is interesting, but such details may detract from the purpose of this letter, which is to inform my fellow shareholders that I do not intend to surrender my existing shares for what is not only an insufficiently explained objective but a rather egregiously ill-conceived adventure.
Here are some of the reasons.
1. While shareholders could vote for whatever they want, they cannot deprive other shareholders to act in their best interest, including the right to dispose of their shares as they see fit.
2. It is an unfortunate fact that the directors sought and obtained the Court’s sanction of the Scheme, but no provision was made for those shareholders not willing to participate in the new Scheme.
3. At no stage was any of the two principal regulators – the Securities Council and the Registrar of Companies – engaged in the court process. Usually, the Court would request that the regulator be made a party in any application.
4. It is amateurish and simplistic to assume that a share in BDIHHI will trade at an identical or higher price than that of Banks DIH Limited.
5. If and when the shares of BDIHHI are brought to the Stock Exchange for trading, it is the market that determines the price, not the directors. How often do we not read of share offers on a Stock Exchange either failing or steep falls in price.
6. Banks DIH Limited has retained earnings (undistributed profits) of approximately $50 Bn, available for distribution. Banks DIHHI has none. By virtue of two provisions of the Companies Act of which the directors were unaware or recklessly ignored, even if those were to be distributed by Banks DIH subsequently, they constitute capital and not income of Banks DIHHI. Accordingly, they can never be paid as distributable income of shareholders in the holding company.
7. The flip side of this is that the directors of Banks DIH Limited will have sole and exclusive control of the billions built up in Banks DIH Limited over the decades without any scrutiny or accountability.
8. Banks DIH Limited pays dividends three times per year because of its strong balance sheet with billions of dollars in reserves. That will not be possible by the holding company for some time to come.
9. I have had the benefit of reading the minutes of the meeting of shareholders at which the Scheme was approved. At no time during the meeting, or in the booklet promoting the Scheme, did the directors indicate the risks associated with the Scheme. Or give any projections.
10. For the first time in the long history of this hitherto iconic company, its year end will coincide with the company embroiled in a court matter over its very existence, its shares not traded, and unable to pay dividends.
11. Yet, directors have been tone-deaf to questions raised in the media about the Scheme. This is not only irresponsible but reckless.
12. The sensible solution is to have another members’ meeting to reverse the Scheme of Arrangement, which has already cost the company lots of money. Sadly, hubris and ego will get in the way.
13. If so, the directors should do what is in the best interest of the company and the shareholders as well – resign en bloc.
I appreciate that shareholders expect to receive dividends, and to be able to trade their shares. But simply capitulating at this time can cost them dearly in both the short and medium terms. Before exchanging their shares, shareholders should demand explanations and information from the directors, contact the regulators, consult with fellow shareholders and consider seeking legal advice and action.
Yours faithfully,
Christopher Ram
Shareholder in Banks DIH Limited
