Trustco opts to fight legal battle in public domain
In a move that is uncharacteristic for a listed company, the Trustco Group has recently taken the strategic route of publishing full detail of the dispute between them and the Johannesburg Securities Exchange, and putting out regular updates on how the litigation is unfolding.
“It is notable that the JSE did not, as per their mandate and in accordance with the Listings Requirements, refer the matter to South African Institute of Chartered Accountants (SAICA), Independent Regulatory Board for Auditors (IRBA) or any relevant professional body for a further independent opinion, should an issuer fail to comply with IFRS,” said Dr Quinton van Rooyen, Group Managing Director of Trustco.
The dispute between Trustco and the JSE arose in the 2019 annual financial statements where two loan waivers by Van Rooyen as majority shareholder, were treated as gains, consequently portraying the group as profitable when in fact, it has lost nearly one billion Namibia Dollar as a result of the prolonged recession before Covid-19. The combined value of Van Rooyen’s waiver amounted to just more than N$1.5 billion.
A second dispute revolves around the way undeveloped land at Herboth’s Blick is treated as investment property and not as inventory. A revaluation of the land lead to a substantial gain on Trustco’s books, an accounting move which the JSE alleges distorts and falsely portrays the groups’ actual financial position. On the latter issue, Trustco said in a statement released on Friday 15 July 2022: “The dispute affects only Trustco’s investments in the property portfolio entity and the resources portfolio entity and has no effect on the Net Asset Value of the Group.”
At the heart of the matter is the difference in interpretation of the so-called International Financial Accounting Standards or IFRS, which is used widely in developed economies as a benchmark for financial reporting by listed companies. In short, it is an extensive set of accounting rules for public companies.
“The JSE contends that Trustco has failed to comply with the JSE’s Listings Requirements and the relevant IFRS accounting standards and the JSE informed Trustco to restate its financial statements,” stated Trustco.
Van Rooyen also contended that the JSE’s decision was made by an official not authorised to make that decision. As a result of the deadlock between the JSE and Trustco, the latter has decided to take the matter to court and applied for an urgent interdict against the bourse.
“Trustco’s Board of Directors, having consulted with its external JSE accredited IFRS experts and auditors, and having concluded multiple unmodified and unqualified audits by two independent JSE-accredited audit firms, maintains their stance that the transactions were correctly accounted for, reported and disclosed,” Trustco stated.
