Since the dispute between Farai Rwodzi of Interfin Bank Holdings Zimbabwe and myself erupted after the corrupt, illegal and irregular takeover of Century/CFX Bank by Farai Rwodzi and Interfin Bank Zimbabwe it has become clear that Farai Rwodzi, Interfin Banking Corporation and its shareholders and Directors ignored basic corporate finance rules of engagement that of conducting an enhanced due diligence before you make an acquistion or major investment in another entity.
If Farai Rwodzi and Interfin Banking Corporation had done an enhanced due diligence on Century /CFX Bank they would have discovered that Century/CFX Bank was already a disputed asset and an intense ownership battle was already under way with ENG Capital seeking the reversal of the criminal and fraudulent transfer of its 309 million shares in Century /CFX Bank under HIGH COURT OF Zimbabwe case HC -6244-04.
Such litigation automatically alerts would be investors to stay clear or get involved but set aside contigent liability payment plan.
Interfin Bank Zimbabwe and Farai Rwodzi should have closely looked at the following areas which are basic areas defined by common source freely available internet resources that guide would be investors.
Under High Court Case HC -6244-04 it is very clear that the sale and transfer of the 309 million shares in Century /CFX Bank is contested and the case is still before the courts.
Under such circumstances it is clear any independent legal advisor would have issued a Qualified legal opinion highlighting the potential payments to be made which would increase the cost of acquisition if not stop the acquisition.
Below are some direct areas that Interfin should have paid close attention to during the Due diligence process if ever there was one.
“II. FINANCIAL INFORMATION
A. Financial Statements
1. Consolidated financial statements for all years and interim periods subsequent to the most recent fiscal year end
2. Monthly income statements for most recent 12 months
3. Internal financial (profit and loss, capital expenditures, etc.) projections, and all supporting information
4. Most recent business plan
5. List of any off-balance sheet liabilities not appearing in most recent financial statements (including the notes thereto)
6. Auditors reports (“management letters”) and management responses
7. Summary of accounting policies to the extent not disclosed in financial statements
B. Tax Materials
1. Federal, state and municipal returns
2. Description of and documentation relating to any pending issues with tax authorities
3. Tax basis of assets of the Company and of capital stock and assets of its subsidiaries
4. Tax sharing or indemnity agreements
5. Closing letters and closing agreements, appeals reports, tax litigation status, Internal Revenue Service (“IRS”) rulings and technical advice memoranda, and any other material IRS documents and tax assessments documents
1. All instruments evidencing debt obligations or lines of credit and all agreements and material correspondence relating thereto
2. Any other actual or contingent indebtedness (e.g., loan guarantees, letters of credit, banker’s acceptances, swaps) not reflected in most recent financial statements and all agreements and material correspondence relating thereto
3. List of existing key financing institutions
1. Schedule of current notes payable/receivable, intercompany advances and description of cash management system
2. Description and listing of current reserves
3. Description of revenue/cost recognition policies
4. Breakdown of selling, distribution, marketing and administrative expenses
5. Explanation of foreign exchange accounting policies, if any
6. Information regarding any indebtedness to the Company or any of its subsidiaries of directors and senior officers
7. Cost of sales breakdown
III. EMPLOYEE MATERIALS
1. Employment agreements (including, but not limited to, contracts with management personnel or entities affiliated with management personnel)
2. Collective bargaining agreements
3. Consulting agreements
4. Employee handbooks, summaries, guidelines and bulletins
5. Schedules of salaried and hourly employees showing their current compensation rates and breaking out employees by:
a. Geographic location
d. Years with company
e. Union vs. non-union
f. Participation in employee benefit plans
g. Part-time vs. full-time
6. Description of labor disputes, requests for arbitration or mediation, grievance proceedings, etc.
7. Description of negotiations with any unit or group seeking to become the bargaining unit for employees
8. Employee turnover, absentee history and severance policy
9. Description of any union representation elections
B. Benefit Plans
1. Any pension, supplemental pension, retirement, post-retirement, stock option, severance, incentive, profit-sharing, executive compensation, bonus and other employee benefit plans (and any related trust agreements and insurance or annuity contracts), including information regarding employer stock held thereunder, a schedule of plan assets, a detailed description of the plan (including structure, etc.) and a list of trustees
2. Audit and actuarial studies and reports including summary plan descriptions, annual returns and ZIMRA and other tax filings, NSSA pension and retirement plans and details of any accrued liabilities not reflected therein
3. List of any asset transfers or other withdrawals, partial wind-ups or contribution holidays with respect to all pension plans”
These are general guidelines that Investors need to follow to ensure that they do not invest in encumbered assets with hidden or contigent liabilities.