KAMPALA – Guangzhou Dong Song Energy Group Limited, a Chinese firm producing phosphate fertilizers in Tororo, Eastern Uganda, is locked in a court battle over alleged fraudulent acquisition and ownership of a multi-million dollar mineral deposit.
Launched in October last year, Guangzhou Dong Song Energy Group Limited is implementing the $620 million (about Shs2.2 trillion) Sukulu Phosphate Comprehensive project in Tororo District.
In a case before the Commercial Court, Guangzhou Dong Song Energy Group Limited is jointly sued with its directors; LV Weidong, Mao Jie, Yang Junjia and Uganda Hui Neng Mining Limited.
The proprietor of Fang Fang Hotel in the Kampala, Fang Min is claiming for recovery of more than $18m (Shs66,715,346,732) as her interest in Uganda Hui Neng Mining Limited, the company whose mining license was allegedly transferred to Guangzhou Dong Song Energy Group Limited.
Min alleges that Lv Weidong defrauded her of $9m that arises from both investment and interest, from her investment in the Tororo based Sukuru Phosphate project.
Court papers show that in 2012, Weidong requested Min to partner him on the project which she accepted and they both formed Uganda Hui Neng Mining Limited incorporated as a joint venture company that was granted the mineral exploration licence number 1178.
Documents also show that Madhvani Group owned the exploration and mining licence. When Weidong wanted to acquire the licence, Madhvani demanded for $7m and a 20% stake in the company, and a $10m advance.
According to the complaint, the exploration area is of immense economic value and contains many valuable minerals including large deposits whose value is estimated at $5,223,990,000 but in December 2013, LV Weidong in collusion with Mao Jie and Yang Junjia fraudulently passed a board resolution of Uganda Hui Neng Mining Limited to transfer its exploration license to Guangzhou Dong Song Energy Group Limited.
It is alleged that the purported board resolution was passed without the knowledge and consent of Ms Min and without following the due process of convening a board meetings.
“It is also manifest from the impugned resolution that the purported transfer of the first defendant (Uganda Hui Neng Mining Limited)’s exploration license was intended to enable the second defendant (Guangzhou Dong Song Energy Group Limited) to obtain a loan funding under the pretext of financing a project in Uganda. Indeed the plaintiff subsequently learnt from media reports that the second defendant subsquentl;y procured a $240m loan from the Industrial and Commercial Bank of China purportedly to develop Sukulu Phosphate deposits,” Ms Min states.
Min laments that in the process of incorporating Uganda Hui Neng Mining Limited, Weidong requested for a bailout, on the basis of stringent cash transfers laws in China.
The hotel proprietor says she agreed to pay for the nominal share capital and incorporation fees, and remitted $5m towards preliminary expenses.
“My contribution towards the nominal share capital and preliminary expenses is also expressly admitted by the defendants in their written statement of defence,” states Min.
Documents indicate although Weidong took up 80 shares, he did not fulfil the requisite.Min got 20 shares but Jie and Jinjia who had signed the memorandum and articles of association, were not given shares.
The memorandum stipulated that all shareholders would become directors and Min automatically became director.Min asserts that Weidong never contributed $20m as he claims to have contributed.
“Weidong was not able to reimburse his nominal value of 80%.We subsequently agreed that he would transfer an extra 15% of his shares to me, increasing my share to 35%, as he arranged to reimburse for me the 65% shares,” says Min.
Min is aggrieved that in December 2013, only four months after the licence was granted, the trio of Weidong, Jie and Jinjia defrauded her by altering the licence.
“Weidong, Jie and Jinjia without my knowledge passed a board resolution dated December 12, 2013, they transferred the exploration licence which was the most valuable asset of the joint venture company to Guangzhou Dongsong Energy Group,” contends Min.
The hotel proprietor emphasises that transfer was done without her consent. She says Jie and Jinjia were not shareholders, making the transfer illegal since the articles of association stipulated that all directors have to make collective decision.
Documents show that the licence was transferred without any payment to Uganda Hui Neng Mining Limited.
Min maintains she was holder of absolute powers of attorney but was surprised when Ministry of Energy and Mineral Development accepted and endorsed the transfer to Weidong’s company.