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The besieged Claxton Bay-based cement producer, TCL, is facing an escalation this month of long-standing legal disputes with a majority of its shareholders, who want to remove six directors, and with the union representing the majority of its workers over the payment of backpay.
Shareholders holding 54.7 per cent of TCL’s ordinary shares have gone ahead and scheduled a special (compulsory) meeting of TCL shareholders for August 19 at 5 pm at the Radisson Hotel on Wrightson Road in Port-of-Spain.
The only business of the special meeting is to consider and, if thought fit, pass resolutions on the removal as TCL directors of Andy Bhajan (chairman), Rollin Bertrand (CEO), Bevon Francis, Carlos Hee Houng, Leonard Nurse and Brian Young.
If successful, the six TCL directors would be replaced by businessman Wilfred Espinet; former permanent secretary Alison Lewis; Jamaican business executive, Chris Dehring; UTC executive Nigel Edwards; Cemex engineers Francisco Aguilera and Carlos Alberto Palero; and Port-of-Spain attorney Glenn Hamel-Smith.
Among the shareholders representing 54.7 per cent of TCL’s shares who support the move to reshape the cement company’s board are its largest single shareholder, Mexican cement giant Cemex; the National Insurance Board; the Unit Trust Corporation; and Republic Bank.
The shareholders requisitioned the meeting pursuant to Section 133 of the Companies Act which permits the holders of not less than five per cent of the issued shares of a company to call a meeting of shareholders for the purposes stated in the requisition.
The TCL shareholders say that they went ahead and scheduled the special (compulsory) meeting following the refusal of the TCL directors to call a compulsory meeting of shareholders after they received a requisition on June 24.
TCL directors rejected the initial requisition because they argued that accepting it would place them in jeopardy of being held in contempt of court, as a result of the injunction that was granted in July 2013 stopping the holding of the 2012 annual meeting.
Legal sources say the TCL directors will use this argument in an attempt to prevent the holding of the special (compulsory) meeting.
While TCL attorneys are working out strategies to block the democratic will of a majority of shareholders, another set of the company’s lawyers are fighting to prevent TCL from being forced to pay $90 million in backpay to the company’s employees.
Last week, the Industrial Court in Port-of-Spain rejected a request by TCL that it be allowed to delay the immediate payment of the $90 million backpay its owes to its Trinidad employees.
This is the second time the Industrial Court has rejected the TCL argument that it be given time to pay off the backpay.
In awarding a nine per cent wage increase over a three-year period to five bargaining units of TCL workers on June 27, the Industrial Court ordered “the payment of arrears be effective on or before August 8.”
In June, the Industrial Court judgment quoted TCL as arguing that it should be allowed to make the backpay payments in four quarterly installments.
According to the judgment, TCL argued: “A review of the audited financial statements would confirm that there was no cash allocated or put aside in a bank account to meet any backpay payments to employees.
“Currently, all cash generated by the TCL group was being used to meet the loan repayment requirements.
“Failure to meet the quarterly payments would result in the TCL group being declared insolvent and the business placed in the hands of the receivers.
“They requested that the court allow a reasonable time period for the company to pay any awarded pay increases/backpay to the employees and proposed four quarterly instalments.”
In deciding that it was “unable to accede to the employers at this time,” the Industrial Court argued: “We concur with the union that it is only after the court has made an award to increase the terms and conditions of employment that a party should apply to change by extending the method of payment backed by supporting evidence.”
The court also concluded that a decision on delaying the full payment of backpay could not be made without evidence of “the calculated quantum of the expenses arising out of such award, the up-to-date financial positioM
Whether TCL presented such evidence before the court last week could not be verified.
OWTU sources said TCL was attempting to appeal the Industrial Court ruling to the judiciary, but the company did not formally respond to a request for clarification on this issue on Thursday.
On the issue of TCL’s ability to make the $90 million backpay payment by August 8, company sources confirmed that the company is making all payments from the cash sale of its products as no commercial bank will extend overdraft facilities to the cement producer.
In May, TCL said “it decided to postpone” an attempt to raise US$325 million on the international capital market as it “awaits more favourable market conditions.” Of the US$325 million, US$295 million would have been used to repay existing debt, while US$30 million would have paid fees associated with the offering and been used to improve its working capital.
Responding to a comment from Finance Minister Larry Howai in the Sunday Business Guardian of July 20 that he was having “nightmares” thinking about the possibility that TCL could be forced to seek protection from its creditors, TCL issued a notice on July 24 stating that since its debt-restructuring exercise in 2012, it “has met all six quarterly debt-servicing payments and is fully compliant with all debt covenants.”
The company said: “All public pronouncements to date have made mention of the fact that the company is steadily improving without any of the normal precursors to insolvency or bankruptcy such as complaints from suppliers, requests by the company for waivers of covenants or major disruptions in the supply of cement.”
In outlining the steps the Government is taking to implement the Bankruptcy and Insolvency Act, Howai said he wanted to use what he thought would be a period of relative corporate normalcy and calm to implement the infrastructure of the law.
Howai said, “I was there feeling good that nothing complicated was likely to come up. Now, of course, I am having nightmares that I could potentially end up with this massive thing that we never envisaged and I don’t know if we have enough skills and experience to deal with this as the first one.”
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