Solicitors of Afrisat and Midsea have confirmed there was a deal between their client and the Ghana Football Association in the Glo sponsorship deal.
According to a statement released in Accra today, Afrisat employed the services of Midsea to deal with the FA on a commission basis contrary to media reports.
The Ghana Football Association reproduces a press statement by solicitors of Midsea and Afrisat International:
Press Release on Glo Sponsorship Deal with Midsea Company Limited
Our attention has been drawn to a number of publications in the print and electronic media on the above issue and the deliberate attempts by sections of the media to misinform, distort and misuse information regarding the deal struck by Midsea Company Limited (“Midsea”) and the Ghana Football Association (“GFA”). We have the firm and effective instructions of Midsea and Afrisat International, our clients, to respond to the various publications on this matter and to clarify the issues raised so that the general and discerning public can be better informed about the origins, nature and scope of the deal.
In order to do so, we wish to begin by setting out the substantive issues that have been raised in the various publications and to respond to them accordingly. From our reading of the publications, the substantive issues raised are as follows:
1. Whether Midsea which is duly registered as a real estate company can enter into a sports sponsorship deal due to the fact that its own corporate objects do not include the business of sports management;
2. Whether transaction between Midsea and the GFA is illegal because the board of directors of Midsea have denied knowledge of it;
3. Whether Midsea only fronted for Afrisat International after the declaration of insolvency by GBS which sponsored the premier league until its own demise; and
4. Whether the agent who struck the deal with the GFA is a “mysterious” person “whose name has become even difficult to be remembered or spelt by FA officials”.
Before dealing with the above issues, it is important to set the records straight with a brief history of how Midsea got involved in the Glo sponsorship deal. In or about October 2008, Midsea was approached through its managing director Mr. Anthony Cole, by Afrisat International, a South African company with an enviable track record in the management of sports sponsorships, to act as its agent here in Ghana for the sole purpose of executing an agreement with the GFA in respect of the Glo sponsorship of the premier league. By a letter of agreement dated October 20, 2008, Afrisat International acting through its managing director, Mr. Rene Williams Koue Bi, appointed Midsea as its agent to enter into and execute the agreement with the GFA. The said letter of agreement unequivocally stated that Afrisat International would lend its expertise, knowledge and skill in the brokering and implementation of sports sponsorship deals to Midsea for the efficient and effective implementation of the agreement with the GFA. In consideration of its services, Midsea was to retain a percentage of the fee payable under the sponsorship deal and to remit the remainder to Afrisat International as per instructions.
It is important to note that Afrisat International had been responsible for all the ground work resulting in the Glo sponsorship deal. Afrisat International had invested heavily in brokering the deal but was forced into using an agent because of its previous relationship with GBS which had gone bankrupt in the course of sponsoring the premier league. Midsea saw this as a significant business opportunity in spite of its lack of experience in this field and took advantage of the deal to enhance its earnings and diversify its business in the face of a slump in the real estate market due to the global recession. Indeed, no rational market actor presented with this opportunity would have turned it down.
It is against this background that the first issue relating to the nature and scope of the business of Midsea vis-a-vis the deal brokered with the GFA has been raised. It is undeniable that Midsea is duly registered under the Companies Act as a business entity. Among others, its authorized business includes real estate, import and export and manufacturers’ representation. In that regard, it seems anomalous that it accepted to enter into an agency deal not involving its core business. However, it is important to point out that this fact alone is not sufficient to render the deal invalid as has been claimed by sections of the media. Our company law prohibits companies from engaging in business not authorized by their regulations but the Companies Act also provides that a transaction entered into by a company is not rendered invalid by reason only of the fact that it was not “done or made for the furtherance of any of the authorized businesses of the company or that the company was otherwise exceeding it objects or powers.” In view of the law that the regulations of a company constitute a contract between the company and its members and between the members inter se, it is only the members and in some cases, creditors of the company (e.g. a holder of a debenture secured by a floating charge on the property of the company) that are entitled by law to apply to a court of competent jurisdiction to enjoin or prohibit any transaction that is entered into in breach of the company’s objects or in excess of its powers. Consequently, the sponsorship deal between the GFA and Midsea is not invalid by reason of the fact that sports sponsorship is not one of the stated business objects of the company.
In light of the foregoing, the second issue relating to the so-called lack of knowledge of the details of the deal by the directors of Midsea poses no significant legal threat to the transaction. Under our company law, a company can act through its management, board of directors or annual general meeting. The company-in-general-meeting is the highest decision-making body followed by the board of directors. Managers run the day-to-day business of the company and are vested with the power to take decisions subject to the approval of the board of directors. Both directors and managers who hold positions as directors stand in a fiduciary relationship with the company and this requires them to act in the best interest of the company. While this means compliance with the regulations of the company, it also means that as prudent managers of the affairs of the company they should not let go business opportunities that could potentially improve the profitability and financial viability of the company when these present themselves.
In the circumstances of the Glo sponsorship deal, the management of Midsea took the decision to accept the agency deal with Afrisat International with a view to enhancing the financial fortunes of the company in the face of a slump in the real estate market. That is certainly a prudent decision which management communicated to the board of directors in broad terms given that the deal did not fall within the core business of the company. In any case, it is not entirely unusual for the board members of a company to have only a general idea of the numerous transactions that management enter into on behalf of the company on a regular basis. In other words, it is not the case that board members are not usually apprised of the details of every transaction involving the company and Midsea is not an exception. Therefore, the claim that the directors’ lack of knowledge of the details of the Glo deal means the deal is fishy is overboard and baseless. The deal is not also illegal due only to the fact that the directors of the company do not have detailed knowledge of it. Indeed, deals can be struck by management and receive ex post facto approval or ratification by a board of directors. Our companies law does not frown on such transactions.
In any event, the director of Midsea who is alleged to have stated that she had no idea of the transaction had explained that she did not have the details of the transaction to be able to engage the media on the minute aspects of the transaction that became the subject of media commentary. In other words, she never denied an absolute lack of knowledge of the transaction.
The third issue raised in the various publications and media discussions is that the transaction was with a faceless and mysterious agent whose name even the GFA finds difficult to pronounce or spell. This is far from the truth and amounts to a deliberate attempt to peddle untruths for the sole purpose of scoring points on this matter. This is because there is currently in force an agreement duly signed between Midsea and the GFA which contains the details of the persons representing both parties. Secondly, Midsea performed and is continuing to perform its part of the sponsorship agreement. The GFA on the other hand has performed and hopefully will continue to meet its obligation to pay Midsea for having brokered the deal with Glo. So far from being a deal brokered by a phantom entity, the sponsorship agreement is a real-world transaction by two entities represented by their duly accredited officers. It is a legally enforceable agreement and we would not hesitate to take action to protect the rights of our clients against the faceless persons behind the numerous publications designed to scuttle an otherwise useful agreement that has provided the financial resources for our premier league that used to be cash-trapped.
The last issue raised by the various publications in the media is that Midsea merely served as a front for Afrisat International after the collapse of the GBS sponsorship deal when GBS declared bankruptcy in the United Kingdom. As we have made clear above, Midsea was approached by Afrisat International to serve as its agent here in Ghana for the purposes of executing the sponsorship agreement with the GFA. Afrisat International entered into this agreement with Midsea after having invested enormous resources into securing the sponsorship of the premier league by Glo. Agency agreements of the kind signed by and between Afrisat International and Midsea are not unusual. Having lent its expertise, knowledge and skill to the procurement of the sponsorship deal, Afrisat International decided that it made economic sense to appoint an agent here in Ghana than to try to establish commercial presence here for the purposes of dealing with the GFA in respect of the agreement. At the same time, Afrisat International continues to provide support to Midsea regarding its management of the agreement when the need arises. From an economic perspective, this arrangement makes perfect sense in that both the principal and the agent are mutually benefiting from it and since it does not violate any existing law, there is no reason why the issue of fronting should be raised.
From the foregoing, it is patently clear that the agreement between Midsea and Afrisat International on the one hand and that between Midsea (as agent of Afrisat) and the GFA on the other hand have not violated any law in this country. It is also clear that the deal makes economic sense for the parties that have to adhere to its terms and conditions. Furthermore, the fact remains that Afrisat International has added value to our premier league since the deal that it brokered with GBS by raising the value of the league from a paltry USD 250,000.00 to over USD 3.5 million within a short period of time. Afrisat International will continue to use its international reputation to secure sponsorships for the Ghanaian league and to add value to the league through its efforts to build the capacity of local organizations.
In sum, we cannot but draw the conclusion that those who are behind the publications are doing so for reasons other than protecting the public interest. Indeed, it makes sense to conclude that the faceless persons behind the publications have a vested interest in disrupting the arrangement for their private gain. We have the firm and effective instructions of our clients to take legal action to protect their interests and reputation and stand ready to do so against any person or group of persons seeking to undermine the agreement between Midsea and the GFA.
Issued by Ayine & Felli Law Offices, No. 3, Mango Street, Adjacent Lion House, Accra, solicitors for Midsea and Afrisat International.