The Kirsh family has pointed to the poor state of corporate governance at listed telecoms and IT solutions provider, FoneWorx, and will request an extraordinary general meeting (EGM) to remove and replace the non-executive members of the board.
The family says it will look to retain the executive directors at FoneWorx to implement a proposed merger between the two entities.
In December 2012, Value+ Nettwork (V+) – a group founded by William Kirsh – and FoneWorx announced an intention to merge.
Issie and William Kirsh, through their respective family trusts, invested in FoneWorx with the view of merging V+ and FoneWorx for the benefit of shareholders.
The Kirsh family own approximately 75% of V+ and 32.7% of FoneWorx, being the respective companies’ largest shareholders.
“In our view the fundamental corporate governance weaknesses at FoneWorx are undermining the shareholders’ opportunity of building shareholder value. We want to introduce greater independence and governance from non-executive members on the board,” Issie Kirsh said
“The calling of the EGM is the most objective measure of shareholders expressing their views. We urge the board to schedule this important meeting without delay.”
William Kirsh confirmed the support of the Kirsh family and V+ shareholders to achieve a successful merger.
“We remain strategically committed to implement the merger that FoneWorx bought into. We are proposing to reconstitute the non executive members of the Board to restore proper governance, achieve the merger and build shareholder value in FoneWorx.”
The family claims, among other things, that FoneWorx has failed to adequately disclose to shareholders the likely future direction of the fax 2 email licence held by FoneWorx, and it has also failed to develop strategies that are shareholder value enhancing.
It points out that executive director emoluments represented a significant 23% (2011: 31%) of operating profits and 30% (2011: 39%) of after tax profits, considerably higher than industry standards.
And, the apparent lack of strategic direction prior to the investment of the Kirsh family in July 2012 has impacted the market rating of the share, the family argued, adding that chairman has not provided a chairman’s report for the last six years or longer.
In electing members to the reconstituted board at the EGM it is envisaged that the new board will initially comprise of the current three executive directors and four non executives so nominated by the Kirsh family, with William Kirsh nominated as non executive chairman.
“Should FoneWorx fail to convene the EGM as requested in a reasonable time, the Kirsh family reserves their rights to approach a court of law to convene it in terms of the Companies Act, 2008, as amended,” the Kirsh family said.