A Federal Higher Court ruling has ended the legal battle between BGI-Ethiopia and Purpose Black, marking the end of property acquisition and dashing the dreams of thousands who invested in a proposed 115-storey skyscraper project.

Complying with the city masterplan, the brewery which is relocating operations from its 30,000Sqm facility in Mexico Square, made a deal with Purpose Black to transfer the property. The court battle ensued after BGI expressed feeling a "lack of genuine commitment" and released statements cancelling the transaction two months ago.

In an interview with Fortune a few weeks ago, Company CEO Herve Milhade said: "BGI Ethiopia is a solid and serious company looking for buyers who can finance the purchase; this was obviously not the case."

Under the terms of the court ruling, BGI-Ethiopia refunded the earnest one billion Birr payment to Purpose Black. The latter has agreed to leave the property, dropping its plan to finance the construction of a residential apartment on the site. Executives of the brewery intend to float a bid and sell the property to another buyer.

Incorporated by Fisseha Eshetu (MD), the four-year-old company Purpose Black Ethiopia initially planned to finance the transaction by selling shares worth 1.5 million Br. Their peculiar marketing scheme that included a gift clause that promised to reward buyers ownership of a three-bedroom 100Sqm apartment brought them into the public eye. The share price later increased to 3.5 million Br offered to a select group of 750 individuals, with dividends set to flow in after construction of "KeGeberew Tower" was completed in four years.

The nearly 1,750 prospective apartment owners who bought shares have been growing anxious by the day, amid the protracted real estate deal.

Eyersualem Shewangizaw, 46, sold her home in Dukem town, Oromia Regional State, for three million Birr after being enticed by advertisements on social media about an apartment life with her five children. She bought shares worth 2.5 million Br in the third round of sales, with hopes of moving to the capital.

"I was mesmerised by the offer," Eyerusalem told Fortune.

She claims to have signed a seven-page contract, assuming that it was for the sale of apartments. Eyersualem has been staying at her mother's Qebele house a few kilometres away from what she thought would be her new abode around the Mexico roundabout.

"All I knew was I would get a house in a few years," she told Fortune.

Eyerusalem plans to go to Purpose Black offices to request the return of her initial capital. However, the management at Purpose Black remains resolute in their optimism that all will be resolved soon for the shareholders.

"Funds would not be returned to shareholders," said Tefera Alemayehu, assistant to the CEO. He said certificates of share ownership were given to buyers, which in no way implied much more than share purchases.

He said they plan to call a general assembly to discuss with shareholders how they may pursue their investment aspirations. While avoiding details, Tefera has a glass-half-full optimism that shareholders will be treated to a rewarding set of alternatives.

"We have crafted exciting plans," he told Fortune.

He claims the company secured a plot in the Wossen area in the Lemi-Kura District for an affordable housing scheme that will begin construction shortly.

"We are also near to securing other plots," he said.

Ermias Birhanu (PhD), legal department head, said they are nearing finalising procurements across multiple plots, providing shareholders with development alternatives, declining to comment further on the matter, until a press briefing to be held soon.

"The site in Wossen will not be enough for all shareholders," he told Fortune.

Officials at the Ministry of Trade & Regional Integration had warned Puropse Black management of the questionable advertisement methods during the issuance of the shares. Mitkwa Adugna, head of desk support & integration of share companies at the Ministry, said the warnings to the company to refrain from the unconventional marketing scheme fell on deaf ears.

"We told them to change the ads," she told Fortune.

However legal experts remain skeptical of the company's marketing scheme and its adherence to the commercial code.

Gebeyaw Semachew, a lawyer and consultant for the past 15 years, said shares can only be divided in cash, not physical items, raising questions over Purpose Black's entire financing scheme. He said the shareholders are fully entitled to take the matter to court and reclaim their lost investments.

"It was an illegal marketing scheme from the start," Gebeyaw told Fortune.

Gebeyaw recommends that minority shareholders request a buyout of their shares by the major ones during the general assembly meeting or explore ways to transfer to a third party.

"They should be cautious in their decision-making," he said.

All eyes are on the pending approval of a directive by the Ethiopian Capital Market Authority (ECMA), which is expected to regulate the issuance of shares to the public. The pending bill stipulates that misleading promotions and public issuances without registered prospectus disclosures can result in as much as 15 years behind bars.

Solomon Zewde, senior legal advisor at the Authority, underscored the need for transparent communication to maintain the integrity of both the companies and investors. He hinted possibility of reviewing share issuance, according to the Capital Market Proclamation, if the initial documents presented to the public were found to have been fraudulent or misleading.

Solomon said companies with plans to issue shares will have to register their securities within a year, once the Authority board approves the IPO directive.

"It will deter any new issuances of an unclear nature," Solomon told Fortune.

PUBLISHED ON May 18,2024 [ VOL 25 , NO 1255]

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