Gulf Holding Kuwait - Was There a Legal Quorum at Its 2016 AGM and EGM (Held 1 March 2018)?

Definitely Not the Eminent Courts of Sharjah

The annual ordinary shareholders meeting (Annual General Meeting or AGM) of a company requires that a minimum percentage of shareholders attend in order for the AGM to be legally constituted.  The same with any Extraordinary General Meeting (EGM).  Typically the company’s Articles of Association provide that if a quorum isn’t reached at the first meeting, a lower quorum will apply to the second, and then an even lower quorum to the third.  

For no doubt good reasons Gulf Holding Kuwait didn’t hold its FY 2016 AGM or EGM until 1 March 2018.  If you’ll look at GH’s package for its FY 2017 AGM  you’ll find a copy of the minutes of both the FY 2016 AGM and EGM.  It appears that the FY 2017 AGM/EGM took place sometime after 1 March 2018.  And, as outlined below, sometime after 25 March 2018!

You may want to download a copy of this document and the 2016 AGM/EGM package as a precaution that GH might change its disclosure policies and remove both of these interesting documents from its website. 

According to the minutes, shareholders representing 517,785,847 of GH’s total 847,000,000 shares or 61.6% of total shareholding attended.   Page 6 for the AGM.  Page 9 for the EGM. 

AA does not know the quorum requirement for a second GH's AGM or EGM.  But it sure looks like we’ve got one.  

But what if one of the shareholders did not have a valid Commercial Registration?  

From the minutes we see that one of the shareholders BSB Ventures asked and succeeded in getting an item added to the AGM agenda.  If you’re interested that was to allow the Board or whoever they delegate to negotiate with related parties regarding legal cases and sign any agreements to resolve. The item was approved.  The minutes state that BSB owns some 19.81% of GH.   Point 10 Page 9.  

So who are BSB Ventures? 

A check in the Bahraini MOIC’s CR search tool www.sijilat.bh  returns a Bahraini WLL company with that name holding CR 95777-1.  This company is shown as owned by GFH.  Formerly EMAD Ventures, its name was changed to BSB 23 April 2017.  So fairly compelling evidence that this is the vehicle through which GFH holds its GH shares.  You can check details at the Bahraini MOIC website.  

One rub BSB’s CR was “deleted by law” 30 November 2017 with the CR “revived” on 25 March 2018 as you will see at the MOIC website.  

According to AA’s understanding of the Bahrain Commercial Companies Law of 2001 as amended a Bahraini company must have a valid CR to conduct business. There are penalties for conducting business without a CR.  

As noted above, BSB Ventures WLL took part in GH’s FY 2016 AGM and EGM held on 1 March 2018.  At that point it appears that BSB Ventures did not have a valid CR.  

If so, it may be that BSB Ventures lacked the capacity to attend and act at the meeting.  Or in other words it wasn’t legally present at the AGM and EGM.  That may well mean that shareholders representing only 41.8% (61.6% - 19.8%) were present.  If so, was that a quorum? 

AA doesn’t know.  AA is not a lawyer.  

Are there any Bahraini or Kuwaiti law legal experts out there who would care to comment on the following questions and provide any other insights they have? 

1. If BSB did not have a valid Bahraini CR on 1 March 2018, did it have legal existence and capacity to act at the AGM and EGM? 
2. If not and therefore a quorum was not reached, are the results of the AGM and EGM invalid?  This could present difficulties if the Board agreed settlements with related parties over legal cases (AGM added agenda item).  Or if the Board took action regarding the capital reorganization approved in the EGM. Presumably lack of a legal quorum would also affect other decisions taken at the meetings as well, but the first two would appear to be the most serious matters..  
3. And finally if BSB did not have a valid CR, but voted in the AGM and EGM, would it be subject to any legal penalties in Bahrain or Kuwait? 

It may well be that GH's FY 2016 AGM/EGM had the required shareholder quorum.  

1. The 25 March 2018 date is the date of recording the revival of BSB’s CR but that event took place prior to 1 March.  
2. Companies without valid CRs may be permitted to undertake certain actions without violating the law.  
3. Or GH’s Articles may allow a much lower quorum for second meetings and so if GH legally did not attend, then a quorum was still reached.

Gulf Holding KSCC – A Closer Look - Who are the Shareholders?

Dr. Herbert West at the GFH Medical Center, AA in Background,GH Kuwait on the Table

As the picture above indicates Gulf Holding KSC (Closed) ("GH") has “come back to life” after a prolonged state of dormancy apparently though efforts by GFH (now its majority shareholder) over the past 3 years.  

Information on GH is fragmentary.  When corporate distress hits, a typical reaction in this part of the world and others is to go silent.  Or to change the name of the institution in the hopes that the public won’t know that the newly named entity has a less than illustrious past.  A “unicorn” loses its horn and turns to good, one might say. 

More info is emerging after GH’s reported awakening from its coma.  

But what do we know?   Not much. 

As usual AA has your back.  

This the first of four planned posts will look at shareholding.  

GH is a closed private Kuwaiti company and as such need disclose less than a public company.  The nature and extent of the “problems” at GH was severe, probably leading to more than the normal reticence from the company and its shareholders.  

We know that the company was created “in Kuwait in November 2005 by well-known investment companies in the region” who for obvious reasons chose to remain less well known in recent years.  Web searches do not disclose shareholder names.  If there was a self-congratulatory announcement of the formation of the firm back in 2005 (which would be reasonable given the year of creation), it has disappeared down the memory hole.  Some sources refer to five founding shareholders. 

We do know that GFH was involved.  If you look at annual reports back to 2012 (at least), you’ll see references to GFH officers holding senior positions at GH and on its board.  Chairman of the Board.  CEO.  But no mention on GFH’s shareholding which we only about learned from GFH’s 2018 FY Annual report.  GFH's investment in GH was fully provisioned sometime in the unknown past.  

Some information on that topic emerged in Note 14 in GFH’s 2Q18 unaudited interim financials and in Note 20 in GFH’s audited annual 2018 financials.  GFH held a 19.79% share (carrying value nil) prior to becoming a 51.18% shareholder through the June 2018 acquisition of an additional 31.39% in shares.  

One other shareholder has self-identified.  That is GBCorp Bahrain (20% owned by GFH). In Note 6 to GBC’s 2018 annual report, GH emerges from nowhere shown as fully written off with the date captions for this entry strangely set to 2014 and 2013 in the 2018 AR.  Amount shown before provision is USD 13.4 million.  Assuming AA is correct and that 1 USD = KWD 0.2920 in November 2005 GBCorp would have 4.9% shareholding based on GH’s KWD 84.7 million paid in capital.  

But we don’t know what GH’s original paid in capital was and whether there were additional amounts raised or earnings capitalized via bonus shares. Remember the Note in GB's financials because you’ll find their plaintiff’s claim against GH outlined here.  We’ll be looking at that in a future post.  

What can we do to find the others?  

My wise mentor on things Middle Eastern once told me “AA, look at the boards of directors and you’re likely to discover undeclared shareholders, especially if you see shaykhly names.” Either the shareholders themselves or their known associates or “friends”. 

So, for example, at one time two sons of Shaykh Zaid were on the board of a bank listed on the ADX.  ADX shareholder records showed their shareholding as minimal.  Were their board memberships an example of only selfless public service?  Or that they were undeclared major shareholders?   AA was told by someone who should know that it was the latter.  

So other than GFH who are shareholders?  

Besides the GFH members disclosed on GH’s website, the GH board includes one individual from Kuwait Real Estate Company, one from INOVEST, and one from GBCorp.   

It’s hard to imagine an individual seeking to associate with GH.  That wouldn’t be much of a reputation builder.  That suggests that KREC and INOVEST are the missing two shareholders.  We don’t know what their holdings, if any, are.  And also if there were other shareholders.  If GBCorp is a shareholder, was Global Investment House in Kuwait one as well?  

There is other information on an earlier shareholder.  

Mr. Ahmed Mohammed Abdulla Al Ameer of Bunyan Real Estate Company a subsidiary of Bayan Investment Company Kuwait is described as one of the principal founders of GH.  He was Vice Chairman of GH for a while.  He doesn’t appear any longer.   Was BIC/BREC a (partial) source of the shares that GFH purchased?   

In the comings posts we’ll take a look at the sorry state of GH, prior to GFH’s rescue.  

And as well raise an interesting legal issue for discussion by the community.