A storm has erupted in Gold Circle country after a threat of legal action against the Gold Circle Board served on Thursday, 11 June, by high-profile businessman and racehorse owner, Nic Jonsson. It concerns the release of ring-fenced funds required to maintain racing’s operations in the region.
Jonsson’s legal move follows the convening of a Special Gold Circle General Meeting next Thursday,18 June, to be held via the electronic meeting platform Zoom, at which the Board will be asking members to remove any impediment in the constitution and the Memorandum of Incorporation (MOI) that safeguards the ringfenced funds from the sale of the Clairwood property. The ringfenced amount is said to be R242-million.
Jonsson, in a letter to fellow Gold Circle members earlier this week, wrote: “This is an outrageous request which needs vigorous debate and one that must be halted forthwith. The Board and Management of Gold Circle have got themselves into a financial predicament. Although the Covid-19 crisis has obviously worsened it, the losses and financial issues that have befallen Gold Circle are not new. There must surely be questions asked as to the competence of the Board and Management?
“The Board have not shared any meaningful strategy with us that details how they intend to deal with this situation or that gives us any confidence in the way forward, except to ask us to release to them in excess of R200-million.
“These funds were not intended to be used to prop up operational losses. Obviously there might well be good reason to release a portion of the funds in some form, under very strict conditions, but this needs to be discussed and debated amongst interested and affected members. We cannot accept that the format of the meeting that has been proposed will give us the opportunity to question Management and Board Members sufficiently, to then enable us to make an informed decision.
“In my view there are certainly other more appropriate ways of dealing with this financial situation.”
The letter from Jonsson’s lawyers, Garlicke and Bousfield, was sent on behalf of Jonsson and “a concerned group of Gold Circle members” and notes that the proposed Zoom meeting does not permit proper interactive communication or real time participation between the participants.
“(Zoom) is no substitute for, nor can it be in compliance with, a meeting in person as is required by the Constitution and MOI, on such an important and serious issue. It may be that in order to enable a proper and compliant meeting in person, it would need to be held at a large venue which would permit social distancing between the participants.
“In addition, it is our clients’ view that once the members are privy to the required full debate regarding the proposed amendments as set out in the Special Resolutions, many of them would be inclined to vote against the proposal and would require more information on alternative options to resolve Gold Circle’s financial difficulties.
“Our clients acknowledge that the members and the board need to resolve the current financial situation and are prepared, along with any other concerned members, to engage with the board to discuss and seek more appropriate relief.”
Gold Circle is said to have asked for an extension of Jonsson’s deadline for a response to his requests no later than 12pm on Friday, and sources revealed that a meeting between Gold Circle and Jonsson’s legal team was held this morning, 13 June, in an attempt to resolve the issue.
Gold Circle’s Chairman, Neil Butcher, told Turf Talk this afternoon that he was, regretfully, not in a position to comment as the matter was still with Gold Circle’s attorneys.
Butcher wrote in a letter of his own to Gold Circle Members on Friday, that the Board had not authorised the release of members’ e-mail details to Jonsson, and pointed to Board member Peter Gibson as having engineered the distribution of the information without permission.
Butcher added: “To counter the effects of the negative financial impact (of Covid-19) on the company, the Board and Management have continuously reviewed and set operational strategies which has resulted in several business restructures all of which have rationalized and reduced the operational cost of providing racing surfaces, infrastructure and training facilities in KZN.
“It is no secret that KZN provides sought-after racing and training opportunities where Gold Circle continues to offer Owners and Trainers the best facilities in the country. In keeping with its Objects and Mission, Gold Circle, being a non-profit company, has continued to use operational surpluses to fund increases in stakes paid to Owners and it is proud of its achievement of paying the highest stake levels in the country.
“The clear intention behind the ring-fencing of part of the proceeds from the sale of Clairwood Park was to preserve investment funding for the future of racing in KZN. National disasters were not envisaged at the time that the decision to ring-fence funding was taken when expectations were that a normal business environment was envisaged for the future.
“The future sustainability of horseracing in KZN is at risk and the Board of Directors and Management once again seek the support of Club Members to release the ring-fenced investment funds to ensure that the company is able to steer the ship into calmer financial waters.
“The Board is proud of its achievements but cannot disregard its fiduciary duties and will have no choice but to file for business rescue should funds not be made available for the continuation of horse racing in KZN. The Board has exhausted all potential avenues of raising funds as all lenders require security which the Board cannot supply without being in breach of its Memorandum of Incorporation.
“Members are encouraged to register and join the meeting with a view to gaining a greater understanding of the background to the resolutions and to make their own personal informed decision. Following registration, Members will be provided with all the necessary details in order to participate. We encourage all Members to avail themselves of the opportunity to join the meeting.”
Peter Gibson told Turf Talk that he would be responding to Butcher’s letter in a statement of his own this weekend, as he’d like to offer his views on what had transpired.