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Lessons from the Steinhoff Debacle

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Presentation on theme: "Lessons from the Steinhoff Debacle"— Presentation transcript:

1 Lessons from the Steinhoff Debacle
Zain Lundell Zunaid Lundell

2 Lessons from the Steinhoff Debacle
5 March 2019

3 Ongoing litigation against Steinhoff - Update on process behind litigation and discussion regarding ISLG and its structure UC is the leading public institution in the world. So when large companies started redefining their mission to serve the public good, we began to lead the development of research and curriculum in this area.

4 Who is behind the Steinhoff Investor Litigation Efforts?
Experienced US/DE shareholder recovery company involved in almost all important non-US shareholder litigation (generated €90 mio Olympus settlement in Japan; generated €1.3 bn Fortis settlement in the Netherlands; involved in Porsche, VW, HRE, Vivendi, Petrobras & Toshiba. DRRT Experienced and well-funded UK litigation funding company (over €300 million in funding ability) Therium LHL Attorneys Bynkershoek TILP Litigation Experienced RSA counsel involved in other class actions such as Listeriosis class action and VW Emissions class action Experienced NL counsel involved in other representative actions such as Fortis/Ageas Experienced DE counsel involved in majority of German model cases proceedings such as VW, Porsche, Hypo Real Estate, Deutsche Telekom etc. (over €10 bn in total claim values)

5 Legal Complaints Against Steinhoff
Representative action (limited Dutch foundation class action) by International Steinhoff Litigation Group via local counsel Bynkershoek against Steinhoff International Holdings NV and Markus Jooste; future claims to be added against Steinhoff RSA, Deloitte & Touche (NL and RSA), various banks and individual directors/management. Other action by Dutch shareholder association VEB to seek liability against Steinhoff International Holdings NV and Markus Jooste is currently stayed until April 2019. Representative action (opt-out class action) by International Steinhoff Litigation Group via local counsel LHL against Steinhoff (NL and RSA), Deloitte & Touche (NL and RSA), various banks and individual directors/management Representative action (model case action) by International Steinhoff Litigation Group via local counsel TILP against Steinhoff International Holdings NV. Criminal Investigations continue against the company as well as Jooste, LaGrange and others in the Netherlands, South Africa and Germany.

6 Key Aspects of Steinhoff Class Action in RSA
Only real opt-out class for all investors in both Steinhoff companies Steinhoff is a fragile company and has limited resources for any potential global solution/settlement Support of all investors (retail and institutional) is helpful for court to exercise jurisdiction Private actions outside of the RSA and NL class actions may destroy any potential for a global solution and drive companies into bankruptcy Any global settlement of shareholder claims requires a RSA solution for all shareholders alike

7 Questions From Investors Who Could Not Attend
What should I do next? Register (if you have not) and wait for updates. How much can I recover? It depends on the company and how much money it can obtain from the sale of assets and after paying off senior creditors. Importantly, ISLG has claims against Deloitte, banks and directors which will maximize ability to recover for losses suffered. Questions From Investors Who Could Not Attend What if I signed up for another effort want to change? Terminate support or registration and join our group – no cost to do so. ISLG doesn‘t keep anybody hostage; ability to leave the group at any time

8 Important Aspects of a Comprehensive Loss Recovery System
Monitoring and Assessment Pro-Active Portfolio MonitoringSM Systematic monitoring, tracking and analysis of global opportunities to recover unforeseeable investment losses caused by issuers in violation of disclosure obligations Action Claims Filing in Global Securities Class Action Settlements Active Representation in Selected Special Cases (U.S./non-U.S.) OR Effect Comprehensive Investor Loss Recovery

9 United States and Canadian Class Action Settlement Claims Filing Process
Step 1: Monitor and notify client of class action settlements open for claims filing Step 2: Retrieve data from data transfer/warehouse or Individual Trade Request (ITR) Step 3: DRRT submits Proof of Claim (PoC) to the claims administrator with all supporting documentation (Power of Attorney, Trading Data, Affidavit of Accuracy) STEP 4: Deficiency correction/recording and/or approval/rejection notices Step 5: Once payment is received DRRT will send a Disbursement Statement and transfer payment from client’s Interest on Trust Account (IOTA)

10 Global Distribution of Legal Activities: Past, Current & Future
New Jersey Merck (Vioxx) Merck (Vytorin) New York Bank of America (ML Merger) Citigroup Wachovia AIG Lehman Brothers Enron Corp. Petrobras General Electric Australia Gunns Ltd. National Australia Bank Nufarm Limited OZ Minerals Sigma Pharmaceuticals Newcrest Mining Italy Parmalat Banca Monte Dei Paschi Saipem The Netherlands Fortis/ageas Converium AG (SCOR) EADS Royal Dutch Shell LIBOR/EURIBOR Royal Imtech SNS Tesco Steinhoff United Kingdom Royal Bank of Scotland Lloyds/HBOS France Vivendi Japan Olympus Toshiba Toyota Mitsubishi Kobe Steel Texas Michigan General Motors Maryland Royal Ahold California Infineon Technologies Canada Gildan Activewear Inc. / BlackBerry Valeant Pharmaceuticals Denmark Vestas Wind Systems Germany VW (“Dieselgate”) Hypo Real Estate VW/PHSE Sky Deutschland/Premiere Hess AG Postbank Wirecard Portugal Banco Espirito Santo Brazil Electrobras Embraer JBS / BRF Vale Russia Sistema Denmark Danske Bank New Jersey Valeant Pharmaceuticals South Africa Steinhoff

11 Value Proposition Global Loss Recovery Premium Recovery
Experts in claims filing around the world Pioneering loss recovery efforts in any relevant jurisdiction Objective advice as to when / how to pursue these claims Global Loss Recovery Pursue cases based on solid facts, evidence and sound economic analysis Seek successful, timely resolution and premium recovery for our clients Premium Recovery Small global network of legal and funding experts to ensure the best financial basis for the prosecution of each case Understanding of local laws and customs, local manpower and expertise Think Global - Act Local No risk to join any DRRT action Success Fee ensures we only get paid if you do No Risk or Costs - Litigation Funding

12 Discussion regarding corporate governance and its importance in a post-Steinhoff world
UC is the leading public institution in the world. So when large companies started redefining their mission to serve the public good, we began to lead the development of research and curriculum in this area.

13 INCREASED REPORTING AND DISCLOSURE

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16 Focus is on the board: “Boards meet only periodically, but their responsibility is continuous. Directors whose knowledge is derived only from sporadic meetings are not fulfilling their duty to shareholders. Likewise, executives who view boards as a nuisance only undermine themselves and the company’s prospects for long-term growth.” “Companies that fulfill their purpose and responsibilities to stakeholders reap rewards over the long-term. Companies that ignore them stumble and fail. This dynamic is becoming increasingly apparent as the public holds companies to more exacting standards. And it will continue to accelerate as millennials - who today represent 35 percent of the workforce - express new expectations of the companies they work for, buy from, and invest in.” “The board’s engagement in developing your long-term strategy is essential because an engaged board and a long-term approach are valuable indicators of a company’s ability to create long-term value for shareholders.” Larry Fink Letter - Link here.

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18 Fiduciary Duties of the Board
Scope of directors’ duties; Potential liability and relevant penalties for breach of law and directors’ duties;

19 Common Law and the Companies Act No. 71 of 2008 (“Act”)
Established common law principles Codification of fiduciary duties Section 66 and Section 76 of the Act

20 Good faith and Proper Purpose
Best interests of the Company Degree of care, skill and diligence that may reasonably be expected from someone in that director’s position.

21 THE BUSINESS JUDGMENT RULE
Section 76(4)

22 Reasonably diligent steps to become informed about the matter;
Made a decision, or supported a decision of a committee or the board with regard to that matter; Had a rational basis for believing, and did believe, that the decision was in the best interests of the company.

23 The best interests of the Company What comprises the Company?

24 Section 77 – Director Liability
Section 77(2)(a) Section 77(3)(d)(i) Section 76 read with Section 77 Imposes liability on a director for any loss, damages or costs sustained by the company as a consequence of a director’s breach of his/her fiduciary duties A director will be liable for damages sustained by the company where he/she knowingly or recklessly signs or consents to the publication of a financial statement which is false/misleading Liability of directors in terms of section 77 read with section 76 is joint and several Reasonable conduct of a director is an objective assessment with regard to the certain subjective elements

25 QUESTIONS?

26 THANK YOU


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