A legal battle has broken out for control of MoneyMart Finance, a local microfinance firm, with one shareholder, Mr Edward Galante, approaching the High Court to challenge his removal from the board.
Mr Galante, a director of CBZ Holdings — the country’s largest banking group — was removed from the MoneyMart board early this year. His removal allegedly followed his failure to formally offer himself for re-election, as required by the Subscription and Shareholders Agreement (SSA) of 2022.
Founded in 2013 by entrepreneur Dr Ethel Mupambwa and operational since 2014, MoneyMart has emerged as a leading microfinance institution in the country.
The company primarily supports women and youth-led small businesses, extending its reach into several marginalized areas.
Mr Galante, who holds a significant stake in the company, argues that he must be reinstated.
He contends that his removal from the board was based on the July 2022 shareholders’ agreement, which he claims became void once its primary purpose — accommodating a foreign partner —was no longer applicable.
Instead, he argues that the 2018 agreement, under which he became a shareholder after investing in MoneyMart, should now govern the institution.
In 2021, Eclectics International, a Kenyan firm, was offered a 25 percent shareholding in exchange for delivering a digital banking system.
Under the Memorandum of Understanding, the delivery of these shares was contingent upon the completion of specific implementation conditions, including obtaining Exchange Control Authority approval from the Reserve Bank.
The agreement also specified the board’s composition, mandating a maximum of five directors, including a managing director. It further stipulated that any shareholder holding at least a 20 percent stake was entitled to nominate one board member for a two-year term, with the option for re-election.
It was also agreed that, should a shareholder fail to exercise this right within 30 days of being notified of a vacancy, the remaining shareholders may nominate and appoint a suitable director by simple majority.
MoneyMart relied on this basis to remove Mr Galante from the board.
Mr Galante, however, contends that the 2022 agreement was rendered void because Eclectics failed to satisfy the conditions precedent—specifically, obtaining approval under the central bank’s Exchange Control approval rules.
MoneyMart and its directors oppose this view, arguing that the Exchange Control requirements became moot once they were waived. To bypass the hurdle of obtaining regulatory approval, Eclectics International was advised to establish a local subsidiary to hold the shares.
While a shelf company named Keshi was initially formed for this purpose, its name was changed to Eclectics Zimbabwe by October 2021 following reservations over the original branding. Before this name change, the parties executed the agreement with the specific understanding that the shares would be delivered to Eclectics upon the successful delivery of the digital banking system.
As such, MoneyMart and its directors argue that Exchange Control issues became redundant following the establishment of Eclectics Zimbabwe, rendering the required initial regulatory approval unnecessary.
MoneyMart reportedly also terminated the agreement, citing a failure by Eclectics to perform its obligations regarding the delivery of the digital banking system.
Mr Galante contends that the 2018 shareholders’ agreement—under which he originally joined the company as a shareholder—should now be reinstated as the governing document, asserting that the 2022 agreement was invalidated by the collapse of the Eclectics deal.
Mr Galante’s involvement dates back to 2017, when MoneyMart secured an Africa Enterprise Challenge Fund award totalling US$350 000, consisting of a US$150 000 grant and a US$200 000 interest-free loan.
A primary condition of the AECF award was the requirement to secure a matching funder. Mr Galante allegedly approached MoneyMart founder Dr Ethel Mupambwa and expressed a strong interest in providing this support.
He formally joined the company in 2018 on the condition that he would match the AECF facility in full. However, despite these representations, his commitment to provide the full matching funds was allegedly never fulfilled.
Court filings show that Mr Galante provided less than US$80 000 of his promised US$350 000 funding, citing economic shocks and COVID-19.
In December 2021, he agreed to a 24-month repayment plan for the remaining US$83,341.86 at 8 percent interest. MoneyMart honoured this deal in full, paying back a total of US$90,463.92. As a result, the shareholder loan is fully settled.
Mr Galante asserts that the 2018 agreement remains the only binding authority, meaning he cannot be removed without a nomination. He further argues that the removal violated Article 19 of the Articles of Association and was done without a formal board resolution.
MoneyMart, however, contends that the 2022 agreement remains valid, noting that the company has operated under these rules for over three years with Mr Galante’s active participation.
Court records indicate that Mr Galante signed the 2022 restructuring resolutions. He also accepted dividends and nominated directors based on specific clauses within that agreement.
MoneyMart asserts that Mr Galante only challenged the validity of these rules after losing his board seat.
“Parties have since 29 July 2022 conducted themselves in accordance with the 2022 agreement. Each party and board has consistently referred to, invoked and relied upon the 2022 SSA as the sole binding agreement between the parties,” read part of the High Court filing.
“At no stage since the signature date have the parties referred to or involved the provision of the 2018 (agreement). They proceeded to implement the 2022 SSA, regulate their affairs under it and enforce rights arising from it without reference to any outstanding exchange control approval.
“Having acted for three and a half years, on the basis that the 2022 SSA governed the company’s affairs, cannot now’ disown’ that agreement because its provisions have become a commercial inconvenience.”-herald
