The curious case of the resignation that wasn’t

On the fringes of the JSE, the board of poultry company Quantum Foods has ridden roughshod over shareholder rights and is embroiled in a furious attempt to fire a director who insisted governance rules be followed.
7 mins read

At the end of May, Quantum Foods, the eggs poultry and animal foods group, issued an unremarkable stock exchange announcement, flagging a routine change in the board. Well, it was unremarkable – unless you happened to be the subject of the statement, in which case it probably felt outrageously remarkable.

“Shareholders of Quantum Foods are hereby advised that Ms Tanya Justine Annalene Golden has resigned as a director of the company with effect from May 31 2024 and has consequently stepped down as a member of [the] audit and risk committee as well as the social, ethics and transformation committee,” it read.

For any director to quit on the same day of the announcement, 5pm on May 31, is suspicious. But considering subsequent developments, the sentence that followed was chillingly ironic. “The board of directors of Quantum Foods thanks Ms Golden for her contribution to the board during her tenure and wishes her well in her future endeavours,” it said.

As it happens, a significant portion of Golden’s “future endeavours” have been devoted to reversing that resignation – and so far, the board will be pleased to know, she is doing quite well on that score. 

In early November the Western Cape High Court ruled that Golden’s removal from the board was “invalid, unlawful and void”. And, furthermore, that she must be reinstated.

Needless to say, the board probably won’t be pleased with this particular endeavour. But then Quantum’s board isn’t exactly emerging with much dignity from an unprecedented legal battle with its own former director.

Acting judge Davis not only ordered Golden be reinstated with immediate effect; he also directed the board to issue another stock exchange statement notifying shareholders of the order and the reasoning behind it.

To date, the board hasn’t bothered to do what the court ordered: Golden has not been reinstated and there’s been no sign of that announcement. Presumably, this is because the Quantum board has said it is appealing the court’s ruling. Given how busy the Supreme Court of Appeal (SCA) is, that stock exchange statement may not appear within the next 12 months, at best.

So, where is the JSE in this fractious battle? You’d imagine it would be encouraging Quantum to immediately clarify the circumstances around Golden’s departure.

For starters Golden did not resign, she was fired. She was fired by five of her co-directors, three of whom were executive directors – incoming CEO Adel van der Merwe, CFO André Muller and outgoing CEO Hennie Lourens who, after 28 years with the group, was serving his very last day as CEO on May 31.

The two non-executive directors who wanted her to go were chair André Hanekom and Gary Vaughan-Smith, both of whom are substantial shareholders. Curiously, the two other non-executive directors, Larry Riddle and Geoffrey Fortuin, did not sign the resignation letter.

Either way, the upshot is that even if the SCA finds in Quantum’s favour, it is a fact that Golden did not resign, as its announcement said.

But even though what Quantum said was not true, and it hasn’t been corrected, the JSE has been conspicuously silent.

Andre Visser, the JSE’s director of issue regulation, tells Currency: “We are engaging with the company and their sponsor.” Because of this engagement, he said he “cannot comment at this stage”.

Bidding war

So how did this almighty mess happen in the first place?

Well, it’s complicated – jaw-droppingly so for a company that has a market capitalisation of just more than R1bn and a patchy track record to boot.

Anthony Clark, a top-rated small-cap analyst, says Quantum’s shares are now so pricey and tightly held that the company has almost become irrelevant to the market.

“The current share price represents a p:e of around 10, which is higher than that of market leader Astral. It doesn’t make sense to buy Quantum right now unless you’re hoping to influence a bidding war,” he says.

And yet that seems to be exactly what is brewing.

For six or so years after Quantum Foods listed in 2014, not much happened. The share price ebbed, and it seemed to be going nowhere. Then in 2020, things changed dramatically, as a few rivals began to take an interest.

The upshot is that today, almost five years later, Quantum’s shareholder profile is dominated by three blocks of investors.

First, there’s a private equity outfit called Silverstreet, which has 34.78% and appears to be close to the executives. Second is Braemar Trading, a company associated with Zimbabwean tobacco magnates, the Rudlands, which has 31%. 

Third, there is Country Bird Holdings (CBH), which now has 17.36%, having sold part of the 31% stake it bought from Zeder in 2020 to Braemar. 

And now, just to complicate things, private equity group Capitalworks, which controls another chicken producer, Sovereign Foods, has emerged as a potential kingmaker, having built up a 6.1% holding at hugely inflated share prices. 

Finally, chair Hanekom owns 5.73% and other directors have a combined 1.33% stake.

So, as Clark says, the free float is tight.

There is an assumption in some quarters, which seems unsubstantiated, that Braemar and CBH are somehow working together.

One analyst tells Currency this is unlikely, saying that instead, “we have two separate entities, working in the same fashion, to reach the same aims”.

Quantum’s shoddy governance

So how does Golden’s mysterious non-resignation fit into all of this?

Well, from 2020 in CBH’s case and 2024 in Braemar’s case, these large investors have been rebuffed in their attempts to set up a meeting with all shareholders. Which is an unusual position for a JSE-listed company to take, given that shareholders are fully entitled to call for such meetings.

Both Braemar and CBH asked several times for a shareholder meeting, indicating they want changes to the board. A not-unreasonable objective, given Quantum’s long-term underperformance, at least until this year.

Golden’s position on the board was significant. She is a senior counsel who was appointed to the board in 2019 and, unlike some of her co-directors, is not aligned with any of the parties. An ideal candidate, you’d think, in a board littered with accountants and in the midst of a significant legal spat.

“I didn’t want to get involved with the competing shareholders,” she says. “My fiduciary duty was to the company – all its shareholders and the board.”

Tensions escalated early this year as the executive and non-independent non-executive directors continued to refuse to meet Braemar and CBH, claiming their requests weren’t legally compliant. They told the other board members they had got legal opinion on their stance – yet, revealingly, they were not prepared to share that opinion.

Matters came to a head during a board meeting on May 24.

Golden asked the board’s lawyer whether the board would be obliged to call a meeting if Braemar remedied the alleged defects in its demand for a meeting. Yes, she was told. She then asked that the board be given sight of the senior counsel opinion.

The company’s corporate adviser advised against that, referring to concerns about the loss of confidentiality and privilege. Judge Davis describes the subsequent discussion as “robust”. 

Incoming CEO Van der Merwe expressed concerns about the leaking of sensitive information and, bizarrely, told the board members that Golden had also requested the share register from the company secretary on March 25 without informing the board.

It appears that the 52-year-old Van der Merwe, despite being the CEO of a JSE-listed company with a BCom in management accounting, may really not have known that legally any member of the public can request a listed company’s share register. And that the best person to ask is the company secretary.

Nonetheless, after that board meeting, Van der Merwe, Muller, Vaughan-Smith and Hanekom discussed their concerns about Golden’s behaviour.

A week later, on May 31, Hanekom phoned Golden and told her a majority of directors had called for her resignation and that a decision had been taken that Golden must resign.

Hanekom referred to a clause in Quantum Foods’ memorandum of incorporation, which said “a director shall resign his or her office … if a majority of his co-directors sign a written notice in which he is requested to resign”.

Within hours, and before Golden had been given any opportunity to make representation to the board, the company had issued the Sens statement.

As the high court has made clear, it turns out that no matter what your memorandum of incorporation says, you can’t actually fire a director like that. A lot of boxes must first be ticked – and none were, an embarrassing blot on Quantum’s governance copybook.

Piet Delport, a leading corporate law academic and retired mercantile law professor from the University of Pretoria, says Quantum’s “resignation clause” in its memorandum is astounding.

He cites a recent case in the North Gauteng High Court (Jones and others vs Delport and others, 2024), where “the judge makes clear that directors are there at the behest of the shareholders and not at the behest of other directors”. 

Shareholders can fire a director for no reason, but directors cannot. “In very specific circumstances such as negligence or dereliction of duty, directors can dismiss a co-director but none of those circumstances is alleged in this case,” he says.

Not to mention the way in which the board, led by Hanekom and Van Der Merwe, simply ignored process. 

“You can’t fire a director without giving her the opportunity to defend herself,” says Delport. Not only was Golden not given an opportunity, it was only during the course of the court case that she discovered on what grounds she had been removed.

And now, with a Stalingrad-style appeal to the SCA on the cards, it looks as though a large chunk of Quantum’s meagre profits will be soaked up by legal fees while Golden, probably one of the most independent-minded directors to sit on a JSE board, has to wait to get her life back in order. 

Meanwhile, in early September the much-called-for meeting was finally held. Shareholders got to vote on the proposed removal of Hanekom, Fortuin and recently appointed Pieter Burger. It was a remarkably tight affair – an unprecedented 97.4% of shareholders attended and 49.2% voted in support of each of the removals and 50.79% voted against. So, no change in the board – for now.

Sign up to Currency’s weekly newsletters to receive your own bulletin of weekday news and weekend treats. Register here.

Ann Crotty

Winner of just about every financial journalism prize going, Ann has kept the business sector on its toes for years. Uncompromisingly independent, if there’s a shady executive pay plan out there or shenanigans a company is trying to keep hidden, Ann will find it.

Latest from Energy & ESG

Don't Miss