Labat Africa, the JSE-listed technology investment company suspended last month for failing to pay its maiden dividend, now says the Companies Act prohibits it from paying the dividend in its present circumstances – and has admitted that its earlier assurances to shareholders and the JSE were inaccurate.

In an investor statement on Wednesday, the board said it had “failed to appreciate” the effect of issuing about 900 million shares after it declared the 1c/share dividend on 23 June. The new shares fell within the dividend timetable and ranked for the payout, making the obligation materially larger than the one the directors had tested when they certified the company’s solvency and liquidity.

Citing a legal opinion, Labat said that once it no longer reasonably appeared that the company would pass that test immediately after paying, section 46(1)(b) of the Companies Act prohibited it from making the distribution. “The non-payment of the dividend was not a discretionary decision by the board to withhold a dividend which the company was lawfully able to pay,” it said.

The opinion also records that the matter engaged the directors’ duty under section 76(3)(c) of the act to act with the care, skill and diligence reasonably expected of them.

The statement does not say what the 900 million shares were for. But the figure matches the shares Labat issued in July, at 3c each, to pay Muziwakhe Ndhlovu R27-million for a further 24.45% of Classic International, its software distribution subsidiary, as reported by the Finance Ghost at the time. Before the dividend record date, Ndhlovu notified the market that he held 28.41% of Labat – precisely the proportion 900 million new shares represent of the enlarged base of 3.17 billion.

At 3.17 billion shares, the dividend comes to R31.7-million before withholding tax, up from R22.7-million when it was declared. About R9-million of that, before tax, would be due to Ndhlovu, now Labat’s largest shareholder.

Corrected earlier statements

The acquisition was not a late development. Labat first issued a cautionary announcement on the Classic deal on 14 May, more than five weeks before the dividend was declared, and renewed the cautionary on 26 June – three days after the board declared the dividend and confirmed the company would satisfy the solvency and liquidity requirements after paying it. It announced the agreement with Ndhlovu on 30 June and said the terms had been concluded on 1 July.

Labat also corrected its earlier statements. Its 30 July announcement postponed payment four days before it was due, saying the board wanted to align the dividend with the publication of its audited annual financial statements. Correspondence with the JSE on 3 and 11 August said the board remained fully committed to paying in full.

Those statements, the company now says, “did not accurately record the operative legal position”. It said it was making the correction in line with the principle in the JSE listings requirements that false, misleading or deceptive information, or a material omission, be remedied forthwith.

Labat says the prohibition applied by the time payment fell due on 3 August – the date of the first of those assurances to the JSE, and eight days before the second. It does not say when the board itself reached that conclusion, or whether it was before the 30 July announcement.

The JSE instructed Labat on 5 August to pay the dividend immediately or transfer the money to Strate, the central securities depository, pending payment. It suspended the shares on 27 August after Labat did neither. Labat now says the instruction “must be reconsidered” in light of section 46.

The suspension has made matters worse. Labat said that since then, certain creditors and funding providers had withdrawn or reduced facilities, demanded repayment or restricted its access to working capital, putting pressure on its ability to fund ordinary operations. Borrowing heavily to pay the dividend, the board said, could impair the company’s ability to meet its other obligations. It insists, though, that the statutory prohibition arose before the suspension.

Labat said it is preparing a proposal for the JSE that would provide “an appropriate mechanism through which the interests and rights of affected shareholders may be recognised and preserved”. It gave no details. It will also pursue what it calls a recovery and stabilisation programme, including renegotiating working-capital facilities, cutting costs and reviewing its assets and investments.

The audited financial statements for the year to 31 May 2026, to which the dividend was meant to be aligned, have still not been published. They missed their 31 August deadline, the Financial Mail reported earlier this month.