Audit firm Nkonki to voluntarily liquidate Sunninghill operation
Auditing firm Nkonki has taken a decision to voluntary liquidate its Sunninghill operation after an announcement by the Auditor General’s office that it would no longer be making use of the firm.
In a statement issued on Monday afternoon‚ law firm Nicqui Galaktiou Incorporated confirmed the move‚ saying that while talks had been under way to repurchase shares owned by Mitesh Patel‚ the CEO who last week resigned‚ the move by the AG had left the company with no options.
“Given the company’s current state in which it finds itself‚ there was no other option but to resolve to voluntarily wind up the company‚” the statement read.
While the process would take some time to complete‚ 180 employees of the 25-year-old firm would be left without work in the coming months.
“It is regrettable that on April 17‚ 2018‚ the Auditor-General announced publicly that his office had decided to terminate its auditing contracts with Nkonki with immediate effect‚” the statement continued.
Contracts with embattled KPMG would also be terminated‚ the AG said.
“The termination of these contracts arose as a direct result of negative media publications against the majority shareholder‚ Mr Mitesh Patel‚ concerning the purchase of his shareholding in Nkonki.”
There was no other option but to resolve to voluntarily wind up the company.
Patel resigned earlier this month following reports by the amaBhungane Centre for Investigative Journalism that his R107-million buyout of Nkonki was funded by Gupta lieutenant Salim Essa‚ through his controversial consulting firm Trillian.
After the transaction‚ the reports revealed‚ Nkonki landed new work with state-owned power utility Eskom that was potentially worth hundreds of millions of rand for the firm.
Patel was replaced by Thuto Masasa‚ the minority shareholder of Nkonki‚ in an acting capacity. She had begun negotiations to purchase back the shares Patel holds “to ensure that Nkonki could continue as a viable and successful company without any adverse allegations”.
“At the same time Nkonki engaged independent‚ reputable law firms to conduct a forensic investigation in order to address these allegations‚” the statement reads‚ but adds that due to the announcement by the Auditor-General‚ it did not have time to complete this.
The firm would now start the process of finalising all work for clients already under way and expects the liquidation process to take a few months.
“The brutal reality is that Nkonki’s reputation and business has been severely affected by the allegations in the media. The 180 employees including executives‚ management‚ divisional heads and the minority shareholder are victims who had no involvement nor knowledge in the shareholding and loan transactions‚ the funding thereof nor the due diligence processes that were conducted.”
Here is the full statement issued by Nkonki:
Nkonki Inc. is a successful black-owned auditing firm which has had a remarkable influence in the auditing industry in South Africa for twenty-five years.
It is regrettable that on 17 April 2018‚ the Auditor-General of South Africa (“AGSA”) announced publicly that his office had decided to terminate its auditing contracts with Nkonki with immediate effect. Nkonki has been rendering auditing services to the public sector on behalf of the AGSA and has valued its relationship with this office. Nkonki also services substantial private clients but the majority of its contracts are in the public sector.
The termination of these contracts arose as a direct result of negative media publications against the majority shareholder‚ Mr Mitesh Patel‚ concerning the purchase of his shareholding in Nkonki Inc. (Sunninghill). In order to avoid any further reputational damage‚ Mr Patel immediately resigned as the CEO of Nkonki and Ms Thuto Masasa was appointed as the Acting CEO.
Ms Masasa‚ who is the minority shareholder‚ and some of the Executives engaged with Mr Patel to purchase his shareholding to ensure that Nkonki could continue as a viable and successful company without any adverse allegations. The sale of the shares could not be finalised as a result of the cancellation of Nkonki’s public sector contracts.
At the same time Nkonki engaged independent reputable law firms to conduct a forensic investigation in order to address these allegations‚ not only in the interest of restoring its relationship with the AGSA but most importantly to protect its staff compliment of approximately 180 people‚ including interns and students with bursaries. This was also initiated to ensure that Nkonki’s clients were not compromised in any way.
It was impossible for Nkonki to have conducted and obtained the outcome of a thorough forensic investigation into the serious allegations posed in the media prior to the AGSA terminating its mandate with the company.
Furthermore‚ Nkonki did not have sufficient opportunity to address the concerns arising from the recent negative media exposure pertaining to the company and the serious and damaging allegations in respect of Mr Patel’s shareholding in Nkonki.
The Auditor-General made a statement to say that …”these terminations are not a judgement on the capabilities or integrity of the professionals that work in the firms‚ but are recognition of the significant reputational risks associated with matters that affect them at present.”
The brutal reality is that Nkonki’s reputation and business has been severely affected by the allegations in the media. The 180 employees including the Executives‚ management‚ divisional heads and the minority shareholder (who have contributed and assisted in achieving Nkonki’s success) are victims who had no involvement nor knowledge in the shareholding and loan transactions‚ the funding thereof nor the due diligence processes that were conducted.
Given the company’s current state in which it finds itself‚ there was no other option but to resolve to voluntarily wind-up the company. Notwithstanding the winding-up of Nkonki‚ its operations will not cease immediately‚ and the winding-up process may take several months under the control of the liquidators appointed by the Master of the High Court. Nkonki intends‚ where possible‚ to complete its outstanding work and effect all necessary transition processes to ensure that its clients are not compromised.
Nkonki fully understands the integrity and positive reputation that is synonymous with the work that is done by the AGSA‚ and these are the same standards that Nkonki subscribes to in ensuring that the profession is held in the highest standards.
Nkonki will make every effort to ensure that its professionals and employees continue to uphold its legacy in their future endeavours. This decision‚ which was very painful and difficult‚ was greatly influenced by the irrevocable damage to the Nkonki brand and the uncertainty regarding its future revenue streams. Nkonki expresses its gratitude to the Office of the Auditor General‚ the Regulators‚ its clients‚ staff and service providers who have been supportive and loyal over the years.